Friday, August 2, 2013

Connected TVs Enable New Ad Platforms

As the cable set top box ever so slowly fades into the distance, viewers have discovered that their television sets don't need these boxes anymore.  The rise of internet connected television sets to the web enable a new set of viewing experiences.  For some, TVs rely on another connected box to access web based programming, from devices like a Roku box, Apple TV, XBox and Google’s Chromecast.  Even CE devices like DVD players and TiVo boxes offer content directly from the web.  And then there are Smart TVs themselves, like Samsung and its Smart Hub system.  Each of these different devices acting as platforms to aggregate and display all types of content. 

Our connected television sets can connect online to a host of applications, games, websites, as well as content providers like Netflix, You Tube, Hulu, Redbox, and others for video content. It also opens up accessibility to new advertising and monetization possibilities.  These connected sets expose us to new types of display advertisements, overlays, interactive ads, ad viewing in exchange for digital content access, and new commerce options.  But with so many devices, it is easy to see that this new marketplace is still quite disjointed with no common standards yet like the IAB has put into place for the web.  It is a young business, but one that is growing quite rapidly. 

We have become quite accustomed to shopping on our laptop and mobile devices and we accept commercials on our TV shows.  So why not combine the two?  Samsung and other providers are working with entertainment e-commerce company Delivery Agent on a shopping app called ShopTV that lets you buy merchandise from your TV set.  While the idea has been around since the days of Friends (buy Monica’s couch or Rachel’s dress), the timing might now be right.  To tie merchandise sales into the shows and ads that you are watching could become an effortless and enjoyable buying experience for viewers/consumers. 

The connected TV opens up a whole new platform of advertising and commerce options.  While cable operators have been attempting to create an ideal advanced advertising model, they have had limited success.  As more and more consumers gravitate to their connected devices to watch content on their TV sets, the potential for new revenue growth from this interactive advertising model is enormous and bound to skyrocket.  

Cable Television Subscribers Unsubscribing

Both Time Warner Cable and DirecTv reported their quarterly earnings and each share similar news.  For Time Warner Cable, a loss of 191,000 cable subscribers in the second quarter and for DirecTv, a loss of 84,000 cable subscribers.  Where once cable customers were seen switching among cable TV providers,  from cable to dish to telco, now it may be that there is the serious threat of cord cutting.  It seems that broadband access is more important to consumers then cable; broadband connects to TV like services including Netflix, Hulu, Amazon Prime, Aereo, and You Tube.  And the recent introduction of Google's Chromecast has led to an unprecedented demand for this inexpensive little device. 

The notion of the cord cutter has a small drip from the dam may just be turning into a minor stream.  But it is that fear that has cable operators shaping the conversation to investors to say that they are focusing on the better customer with the higher average revenue returned.  Maybe for now the cheaper customer is leaving now, enabling the average revenue to rise for the remaining customer base; still, that customer loss will ultimately hurt the total revenue model. 

Subscription prices are rising as networks keep demanding increases to their license fees. And customers, upset by these high costs are preferring an a la carte model to buy only the service they wish to watch.  The iTunes model of selling singles over albums has been embraced for music and perhaps it will be embraced for TV as well.