Targeting 21st century consumers, Part 2

 

  

Ken Borruso, CTO, Visual Incite

One area that broadcasters and network operators are focusing on is called Project Canoe. This technology upgrade manages the network plant to support a dynamic advertising insertion model unique in each set top box. With this model, the networks may be able to accomplish their original intent of vertical marketing to an individual household that is most likely interested in that product for a premium fee to the advertiser. This technology may also be used to create narrowcast display networks.

 

While this is being thought out and created, digital signage technology available today is used to create a narrow-cast network equivalent as an alternative method of communicating compelling content to a specific set of viewers. 

 

Media companies have followed the trend of creating vertical alternate channels that attract smaller audiences of a special interest to whom they can sell commercial time for a higher CPM. In theory this makes sense, but in reality, they indirectly created a content gap and this is a major reason why the out-of-home real estate rush is on the rise. 

With the promise of the Internet Protocol television on the horizon, a larger set of lower cost independent productions and entertainment venues may emerge, syndicated directly from production stages without the need for broadcast media middlemen. The challenge for traditional broadcasters to find compelling content to fit between commercials will only get harder.

Over 25 years there are three major changes in the network industry that are shaping the behavior of consumers, broadcasters and advertisers: the introduction of alternate cable channels, the DVR and IP TV.

 

Cable and the Internet may have diluted the quality of programming content and the Internet will make it easier for lower quality productions to be seen by millions. When there were fewer outlets for content, the broadcasters vetted out and found the best content that appealed to mass audiences. Talent was no longer a local act. In an instant the nation laughed with Benny and Youngman, sang with Sinatra and saw Beatles for the first time. 

There are some executives who recognized talent when they see it, and quickly secured relations with the artist to become members of their production. Recognizing talent and converting that talent into a franchise has become an art practiced and refined over the years.  But broadcasting is still a business of risk management however with the increase in channels from cable TV, the invention of the DVR and the ubiquity of the Internet, the broadcasters no longer have a lock hold on their viewers in their houses. 

This unfortunately means they no longer have a hold on their advertisers and with fewer advertisers buying less time on diluted networks, they may begin to see they are losing their hold on net profits, too.

History may show that cable TV and DVR were the end of the broadcast networks sponsored business model. That is until IP TV or an equivalent MPEG4 set top box model replaces the channel content over time model to an on-demand subscription model of unique pay-per-view or commercially sponsored streaming content. 

It may be premature for the FCC to get involved in the regulatory aspect of owning too many media outlets inside of private and public spaces, but it may eventually become an issue when the media company owns the screen and the only channel viewable inside a supermarket aisle.  While it is not an issue today, media companies realize they need to get their messages closer to the right person at the right time and are shelling out capital to make sure they are in the right place.

This increases the value of any retail space and presents an opportunity to retail operators and their suppliers to form a direct to consumer network, selling shelf space and screen time to manufacturers.  

The broadcasters and their advertisers are aggressively purusing existing micro-networks in niche markets where they can value add a commercial segment to a qualified buyer for a higher dollar amount per CPM.

For the early adopters, the cost benefit ROI argument was often met with high opposition when a digital signage proposal was presented to a prospect such as a restaurant, retail store or doctor's office or shopping mall. In many of these cases, the ROI did not consider what broadcasters now see as their new media outlet and they may not have considered selling the time to their suppliers to increase shelf velocity. 

This is more great news for business owners who want to operate and manage their own digital signage network. This means a retail operator can begin to create their own network to market their own products and services to their own customers and know they have access to the very consumers that the broadcast advertisers need to reach. They can even choose to bypass broadcasters and create their own private channel and sell the time directly to their own merchandisers, bypassing the broadcast middle man.

Over the past few years, real estate owners presented with out-of-home media companies business plans to replace static signage with third-party owned and operated digital signage networks opened the door for many startup companies to compete with traditional paper media providers. In many cases they failed. One reason they failed is because they lacked the proper content that created a compelling reason to watch the screens.

 

Content is still king, but getting to the screen inside a store does not have to be a broadcasters decision. In the store, the store may choose to buy the content from a broadcaster and sell the time to an advertiser, adding promise to the pay-per view, al-la carte broadcasting model.

There are many financial models with one-time and recurring operating expenses, but on average, given the necessary volume of viewers, a private network can produce a positive cash flow within the first year of operation, like where 400-500 screens are seen by at least a million people in a single month.  This model works from selling the ad time to a third party as is the case in gas station and c-store networks, or doctor's office networks where the media and the messages are targeted to specific audiences. In this model, the real estate owner has what is called the digital rights to show messages to their guests on their properties. In some cases, they are provided a free installation and agreement that the content will be safe and some are compensated for providing the ‘right of way' and the access to their guests.

The real estate owner has the right to deny broadcast companies the rights to use their properties in the spirit of entertaining visitors while they wait for a profit. They do not have to show broadcast or cable television to their guest either, however many do it as service to keep the guests informed, entertained and otherwise occupied while they wait or shop, even if it advertises information that is at cross purposes of the venue. 

However, the clever broadcaster has already produced compelling content for this venue, and has sold the commercial time to vertically motivated advertisers to capture the audience while they wait. The clever broadcaster has also allotted time for the local owner to insert their own custom information.

 

The clever broadcaster does not show competing content or competing services as commercials that may create a conflict of interest to the real estate owners. What is left in the middle and to be figured out by broadcasters and networks is, the option where the real estate owner buys the news feed without the commercials and insert their own local commercials or sell the local commercial time to their own strategic advantage.