If Not At Home, Where?
The background: U.S. broadcast, cable and satellite TV audience growth is flat at best. Its audience demographics are declining while U.S. income and wealth are polarizing--the rich richer, the poor poorer--which compounds TV's problems. Meanwhile, downloads (both legal and illegal), DVRs and the relatively greater credibility of Internet ad measurability all sap TV ad spending. And capitalism abhors industries with flat growth, which is why stocks tied to the TV industry have sagged throughout this millennium.
TV is trying to save itself by embracing Internet distribution, broadcasting data and/or multiple channels and, the biggest effort of all, HD.
And then there are a few new video businesses that seem more like competition to TV as we know it: digital signage, ad-supported digital cinema and mobile digital video. While the people who work in today's TV industry may not think of any of these as TV, consumers sure do.
Beginning with the invention of the car radio in the 1920s and clinched by the growth of TV, which robbed it of most of its home audience in the 1950s, radio made the transition from in-home medium to something that advertisers really only value as an out-of-home medium. If downloads are to TV what TV was to radio, could TV make a similar transition? And, if so, how?
Each in its own way...
Two competitors own the in-cinema video advertising business in the U.S. National Cinemedia is a co-venture of AMC, Cinemark USA and Regal Entertainment Group (which owns 50%), and runs in theaters owned by those groups. That includes Loews screens, recently purchased by AMC. Their competitor, Screenvision, aims to run in all other available theaters, both here and abroad.
In the U.S., the two companies split the market pretty much down the middle. Aside from how they get into whatever theaters they inhabit, the two companies have much the same business model: they run spots intermixed with short programs, using digital projectors with HD resolution. According to Clifford Marks, president for sales/marketing of National Cinemedia, "One third of the spots we run are unique to the medium. We encourage that, or at least to run it in theaters before it runs on TV."
CPMs in U.S. cinema advertising average about $40, according to Marks, or about equal to top primetime shows but below the Super Bowl. In countries where cinema advertising is much more long-established (and, thus, where viewers more commonly sit through the ads) CPMs run up to $80 (Australia). Clearly, this is a strong ad medium. Viewer demographics are desirable, and the data on just how many viewers there are is vastly more accurate than what in-home TV provides advertisers. As 2K and even 4K digital cinema projection take hold, ads in greater resolution should be a more powerful medium, too.
If CPMs in this country rise anywhere near parity with other countries, U.S. industry revenues could be $3-4 billion. That could pay for lots of original shows, some of which might break in theaters but eventually play on broadcast or cable or home video or mobile video etc. etc.
Of course, movie theaters have their problems, too: attendance has been crumbling in recent years, and theaters are pretty empty half the week. Marks says his company programs concerts on slow nights for features (typically Monday). And his largest customer is Microsoft, which runs training teleconferences in theaters using his network. Concert promoters and industrial presentation producers take note.
Cinema ad bottom line: after only a few years in existence, this industry is already pretty mature. With National Cinemedia being owned by its theater network, it's hard to see how anybody else can muscle into that half of the market. Screenvision, however, may either lend itself to a similar theater-ownership play, or may be vulnerable both to new competition from theater owners or from a strictly ad-sales network (with no technology component) once the ads can be transmitted and played over the same network and projector used for (higher resolution) features.
Maybe mobile video is more an adjunct of the cellphone business than of TV. But maybe this is simply because TV companies have not tried hard enough yet to make it their business.
In fact, for all the talk, mobile video is not much of a moneymaker for anybody yet, though it is in the land-grab stage both for technology deployment and for bandwidth allocation. There are fortunes at stake not only for the cellular service providers, but for tech providers, for those who would offer other video services on other sorts of bandwidth, and for programmers who figure out what consumers might actually want to buy.
All the wireless phone service providers are talking about or already delivering video services, but are rolling services out gradually per geography and finding relatively few customers among early adopters. Naturally (this is America, after all), different service providers use mutually incompatible services: Verizon Wireless, Sprint Nextel and Alltel are on EVDO, Cingular is on UMTS/HSDPA. Both systems are "3G," or third-gen networks with roughly 400-700 kbps service.
Would-be consumers need to study coverage maps, then either pay the extra several dollars a month (depending on what plan they had before) or switch providers, and then match the promise of service with what's actually available. Most are now buying such service as packaged with broadband data, and are more interested in Internet connectivity for business than in video.
Above and beyond the pure cellphone network services are two also incompatible video-oriented multicast services, Qualcomm's MediaFLO, operating its own proprietary technology nationwide on the former UHF channel 55 frequencies in the 700 MHz range, and Modeo (formerly Crown Castle Mobile Media), which uses the DVB-H standard over a tiny sliver of bandwidth between 1.67 and 1.675 GHz.
Building out a national network would be much easier for Qualcomm, since it will take an awful lot more cells per any service area for Modeo to serve equivalent numbers of users with so little bandwidth. Both MediaFLO and Modeo's DVB-H require use of a mobile device equipped for that specific technology. So, for example, subscribers of Verizon Wireless, which has a deal to use MediaFLO, must own either separate devices for phone and mobile video, or some new combined device.
Meanwhile, FCC officials are saying they want to auction off the rest of the 700 MHz frequencies (presently used for analog TV) this fall for WiMAX service to commence after the analog frequency giveback in 2009. We've written about this in our newsletter (www.advancedmediareport.com), and there probably will have been many more developments on this front in the time between this writing and your reading. Suffice it here to note that high bidders might use WiMAX (which may or may not work for mobile apps) to compete with or cooperate (using either WiMAX or something else) with Qualcomm or DVB-H standards. And Qualcomm and the DVB-H group may also yet, indeed, bring the two systems into greater compliance.
There are obvious opportunities here on the programming front, in technology supply to the services, and perhaps less obvious ones on the device front.
In programming, MobiTV has been out in front supplying multiple channels of short videos over any available technology for a couple of years now, and claims over 500,000 subscribers over Sprint and Cingular's networks as well as in the United Kingdom. SlingMedia, better known for the home consumer device Slingbox, is now also out with SlingPlayer Mobile, which broadcasts to Windows Mobile devices over the telecoms' 3G nets. There are also a number of players based in Europe and South Korea; because of regional program licensing issues, these will probably not have much to do with the U.S. market.
Bottom line on programming issues: it's so early that everything seems up for grabs, including just what it is that users really want to see. Early indications--sports, business news and music videos are popular now among test samples--may have little to do with what mass users eventually like. Lots of people are, evidently, watching full TV episodes on iPods.
Just how big a business the supply of video production, storage, serving and encoding technologies will be to mobile video all remains to be seen, because it's still debatable just how attractive mobile video will be to consumers. And how many people will want to watch ads on their cellular devices? Probably not too many. Which may not mean advertising won't clutter your phone anyway.
Very germane to whether people accept all this or not may be some advances in consumer devices. Microvision, Coherent, and other companies have projection technologies that could allow for personal video projectors, eyeglasses with partly transparent displays, and other new display tech. Many companies are working on organic LEDs (OLEDs), which should eventually make possible really thin, inexpensive, low-power, long-lasting and high-image-quality displays. If the display is compelling enough, maybe we won't mind that it's full of advertising.
And we haven't even gotten to Digital Signage yet, which may be the hottest form of out-of-home broadcasting going right now. Wait till next month; we're out of space-time continuity just now.
Neal Weinstock is editor-in-chief of Weinstock Media Analysis and can be reached through www.weinstockmedia.com.
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