Harnessing the new TV

Television used to be a big wooden box in the living room that you watched The Brady Bunch on, but these days, it's more of an abstract concept. The advent of video-on-demand (VOD), personal video recorders (PVR) and even video game consoles with VOD and music download capabilities will increasingly allow viewers to exercise more control over what they watch, when they watch it - and what they watch it on.

Television used to be a big wooden box in the living room that you watched The Brady Bunch on, but these days, it’s more of an abstract concept. The advent of video-on-demand (VOD), personal video recorders (PVR) and even video game consoles with VOD and music download capabilities will increasingly allow viewers to exercise more control over what they watch, when they watch it – and what they watch it on.

It’s still early days, with VOD and PVRs having only entered the Canadian market mere months ago, but the pace of change is accelerating. To help keep track of who’s offering what services when, Strategy MEDIA checked in with Canada’s main broadcast distribution undertakings (BDUs) for an update.

Video-on-Demand (VOD)

VOD allows the TV viewer to order a movie from a distributor at any time of the day. The films are stored digitally and sent to television screens through advanced set-top boxes connected to high-speed Internet and cable lines. The technology allows viewers to stop, pause, rewind and fast-forward at will. Unlike pay-per-view, which offers only a dozen movies each day, VOD provides several hundred titles from which viewers can choose.

Cogeco Cable

Cogeco launched its VOD service in Hamilton in early October, and was pleased with the initial response: in the first seven weeks, 5% of its digital subscribers with access to VOD ordered at least one video. By February, 70% of customers served by Cogeco Cable’s major systems in Quebec and Ontario will have access to VOD. ‘We believe VOD is a key driver for digital subscriber growth because it’s a whole new level of flexibility and control,’ says Ron Perrotta, VP marketing.

Rogers Cable

Last August, Rogers became the first cable company to launch VOD when it made the service available to 70,000 digital subscribers in central Toronto. So far, fewer than 25% have actually purchased a video. But Mike Lee, VP product development, expects VOD ‘will put pressure on pay-per-view within 12 months and will prove to be more successful on a long-term basis.’ Rogers plans to make VOD available to its entire customer base over the next couple of years.

Videotron Cable

Videotron is currently running a VOD trial with 1,200 subscribers on Montreal’s South Shore, with plans to make the service widely available to its 175,000 digital subscribers within the first six months of 2003. The company estimates that 50% of its subscribers with set-top boxes will buy videos. Like most other VOD services, Videotron will not charge a monthly fee; customers will pay for each selection, with prices similar to those for video-store rentals.

Shaw

In November, Shaw introduced Canada’s first subscription-based video-on-demand (SVOD) service, Movie Central EXPRESS, in Calgary. Customers pay a monthly fee rather than a charge for each video they select. Shaw Cable customers who subscribe to Movie Central, a premium pay-TV service, can add the SVOD service to their subscription for a monthly fee of $5.99.

Personal Video Recorder (PVR)

The PVR is the VCR for the 21st century, using a hard disk drive instead of a videocassette to record TV programming, and offering more TV viewing flexibility than a VCR. The PVR automatically digitally records whatever you happen to be watching, so you can rewind and watch sections of a show, movie or sports event as many times as you wish.

Bell ExpressVu

Bell’s model 5100 satellite receiver/PVR, introduced to the Canadian market in August 2001, is quickly being joined by competitors. ‘Sales have been growing strongly over the past few months,’ says Madeline Long, retail communications manager. She declines to give numbers, but says, ‘The distributors of the set-top boxes have been running out of stock.’

Rogers Cable

Rogers is testing a number of PVR products, and will introduce one in 2003. However, ‘sales are a function not of demand but of price point,’ says Lee. Until PVR hardware drops in price from its current $500 range to the $200 range, he says, penetration will be limited.

Videotron Cable

Videotron launched PVR in November, selling 400 units in the first two or three weeks. It hopes to sell PVRs to the 10% to 20% of its 175,000 customers who have digital video boxes.

Cogeco Cable

Cogeco meanwhile, has no plans for a PVR offering, saying that VOD eliminates the need for PVR.

Video Game Consoles

Consoles such as Sony PlayStation, Microsoft Xbox and Nintendo GameCube were originally designed just for games, but the next generation of these devices promises to be a different type of beast. New models slated to hit Canada by 2005 are expected to include features now only found in computers and television. These are likely to include Video-on-Demand, downloadable music and digital video recording.

‘We see the Xbox as a Trojan Horse,’ says Ian MacLean, VP of The Media Experts’ iTV Lab in Montreal. ‘It’s a gaming platform, but it has a very powerful processor in it. The only thing separating that machine from a PVR is a TV tuner card, which is very easy to integrate. What you’re seeing there is really the first generation of a complete home entertainment centre. The goal of Microsoft’s strategy is to eventually have one machine managing all of your digital files – audio and video.’

Forward-looking strategies

There’s no doubt that as these new technologies penetrate Canadian homes, they’re going to change the way that consumers watch TV, but what about their effect on advertising?

‘It’s definitely going to be more difficult,’ says Sherry O’Neil, managing director of OMD Canada. ‘We’re still in early days in terms of the penetration of those systems, but the strategy of most media buyers is to be more forward-looking. We shouldn’t be considering only 30- and 15-second spots – but looking at more non-traditional ways of getting in front of the consumer.’

When it comes to PVRs, of course, these ‘non-traditional ways’ include taking ownership of properties, integrating the brand into the programming and actually producing content – but it’s not going to be easy, and it’s not going to be cheap.

‘Buying ownership of a program name, like Labatt’s Hockey Night in Canada, is very expensive,’ says O’Neil. ‘In the past we’ve not gone there for many of our clients, but there may be key properties that reflect a brand or the company’s positioning where we would choose to take a name position.’

The other possibility is to produce content, where the advertiser is able to actually control what’s in the program. ‘It’s a growing area in the U.S. and will certainly grow for Canada as well,’ says O’Neil. ‘The tough part for us is that so much of our programming comes from the U.S. So it may be more of a specialty-channel opportunity than conventional.’

Even within conventional programming, however, branded content is a possibility. ‘The programs usually come in short to Canada because they sell more advertising time in the U.S.,’ says O’Neil. ‘So there is time available within the program to be providing content that is branded to a particular advertiser and is not something the consumer is going to fast-forward through.’ The branded content could be a news update or an interstitial that is more educational and informative than pure advertising.

But for all the attention PVRs have received, it may be VOD that ends up being the tougher nut to crack. ‘To date I don’t recall an occasion where commercial time has been integrated into pay-TV,’ says O’Neil. ‘It may be about branding properties and taking ownership of events. If, for example, it’s a World Wrestling Entertainment (WWE) event, perhaps you do a partnership with WWE if that’s your target group. Ownership of properties is the only way I can see getting around video-on-demand.’