Jack Myers Note: I enjoyed several debates – in person and published – with Erwin Ephron. I consider his friendship to be one of the great joys and honors of my career. Bill Harvey shares details of the upcoming memorial service being held to honor and remember him. Erwin deserves more than a remembrance – he defined media planning as we know it today. I hope you’ll join us on December 5.

Before launching into this week’s post, I want to share details of the memorial for our esteemed and fabled colleague, Erwin Ephron — a legend in his own time.

Erwin Ephron Tribute

A memorial celebrating the life of Erwin Ephron will be held 5:30 pm on Dec. 5 at Simulmedia’s offices at 670 Broadway, New York. Capacity is limited and registrations will be accepted on a first-come, first-serve basis. If you’d like to attend, please contact ephronmemorial@mediapost.com . Please put “Remembering Erwin Ephron” in the subject line and provide your name, company/affiliation, email and phone number.

 

My friend, CBS’s David Poltrack, loves VOD. At last year’s UBS Warburg conference, VOD played a big role in David’s growth forecast for broadcast television. A world in which viewers can watch whatever they want to watch at any time, with a personalized and fun way of knowing what their options are — this could be a good thing for everyone in the television food chain from the advertiser to the viewer/participant.

To me, there are two reasons why every show on television should be available in all its episodes on VOD, ASAP, and with full bore celebrity-and-advertiser-driven public awareness campaigning triggering the new mindset overnight.

Reason 1: Viewers will love it. TiVo was the first great revolution in TV User Experience (UX) optimization, and TiVo is still leading TVUX. VOD with all shows is inherently the ultimate easiest most guaranteed TVUX. If the program recommender is good enough, it is impossible in 99.9999% of cases for the viewer to come away having not enjoyed the experience to some degree. If all their shows are on VOD, or should I say, “ When they are”.

HUTs will go up. Attentiveness will go up. People in a good mood are more willing to tolerate unrequested commercial messages, more open to considering sales pitches. Excessive frequency from specific ads will cease to be a major TV irritant because frequency caps can be imposed in VOD.

Reason 2: Advertising ROI will go up and eCPMs will go down and yet sellers will make more money. This is what addressable commercials do. They also make the ads more relevant so viewers enjoy them more and are more sales responsive .

Both the network (in some cases the rights-holder is the original producer, not the network, though it’s generally the network nowadays) and the cable operator make more money out of addressable commercials on VOD. These deals have been equitably worked out over the course of a decade. Today the cable operator in most cases owns the addressable inventory for the equivalent of the normal cable two minutes an hour on cable networks. And they can also addressably insert after the C3 window. The sewn-in network commercials for the original airing are delivered in VOD non-addressably of course during the C3 window. There is talk of ODC7 (On Demand Commercial Exposure through 7 Days from Original Airing), which would extend the life of the most recent original telecast’s network commercials for the first seven days in the VOD window non-addressably, not only for the most recent telecast but for all episodes of that series.

This would tremendously shrink the VOD addressable inventory. It would also limit the network to CPMs about a quarter of the size of what addressable commercials are now going for. With agencies interested in hypertargeting the purchaser with highest responsiveness to the current creative, using platforms like TRA, eCPMs on non-addressable TV against this kind of target is in the $80-$300 range, and on addressable this goes down to under $80.

I recommend that the networks, agencies, advertisers and MVPDs (Multichannel Video Programming Distributors) all think this out most carefully. The math could be compellingly in favor of moving very quickly to flood VOD with programming and to sell most if not all of the ads addressably after the C3 window.

Back of the envelope says that 70 million VOD homes in a couple of years — if properly stimulated with awareness campaigning, all shows on VOD, effective recommender engines — could be watching easily 2 hours a day on VOD, if not 8. Two hours a day means 56 addressable impressions if it’s all addressable (leaving C3 aside for convenient math). That’s 1.43 trillion addressable impressions a year. At an average $80 CPM (typical of current trades), that’s $114 billion. Obviously for it to go that high the creative must warrant the spend in each case, and non-addressable media are probably crushed. Likely it can never go that high, although Scientific Atlanta,Bernstein Research and many others starting with Next Century Media all forecast addressable commercials bringing incremental billions of dollars a year into TV.

That won’t happen if it’s choked off by leaving non-addressable commercials in every episode of every show. About 99% of the viewing of a show takes place in the first seven days after its airing. However, this is a lower percentage in the most sophisticated media homes today, representing an estimated 15% of the pop. Say this viewing pattern becomes the norm, then first seven-day viewing might be only 80%. Therefore with ODC7, the addressable opportunity — no matter how many billions it turns out to be — is reduced to a fifth of the size it could be, trading $80 CPMs away to get $10-$30 ones.

Whoa, breaking news! We found out at press time that the pre-publication copies of this post, which we distributed to a handful of industry leaders, appear to have led to a plan for ODC7 that includes addressability! This is a wonderful development. ODC7 with addressability means that:

  1. Networks get a lot more high CPM inventory to sell;
  2. Agencies get to buy addressable commercials through networks, which is their preferred way of buying because it is the most efficient in terms of workflow hence the most profitable even given the procurement environment;
  3. MVPDs with addressability outsource more of the ad selling while retaining a revshare so they don’t need to add headcount to deal with the complexity of addressable;
  4. Advertisers engaged with AORs (Agencies of Record) that have access to validated ROI-lifting purchaser viewing data and a sophisticated allocation optimizer can specify which brands, other than the brand that appeared in the live telecast, should rotate through the addressable VOD slot the advertiser had in the live telecast. These will by design be brands with even higher indices on the purchased target than the brand that won the position in the optimizer, and brands whose indices are lower but come closer to the index of the brand that got the live slot. This procedure will ensure maximum purchaser target reach for the advertiser’s portfolio rather than ODC7 functioning only to give the live telecast brand too much frequency.

By vastly increasing the sales effectiveness of TV advertising and richly rewarding networks and MVPDs in the process, dollars will balloon that can go into new content development. This will be the Real Golden Age of Television.

Reprinted by kind permission of Black Arrow On Point blog where a version of this post is also to appear.

Bill Harvey is a well-known media researcher and inventor who co-founded TRA, Inc. and is its Strategic Advisor. His nonprofit Human Effectiveness Institute runs his weekly blog on consciousness optimization. Bill can be contacted at bill@billharveyconsulting.com

Read all Bill’s MediaBizBloggers commentaries at In Terms of ROI.

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