Internet TV has finally arrived. In the three weeks after Christmas 2007, a million people watched content on the BBC's iPlayer. According to Tiscali, one-third of the UK population is now watching on-demand TV. Internet TV is no longer blue-sky thinking. It is here and the time has come for marketers to start thinking about how it will affect them.
It certainly has implications for broadcasters. As Jen Wachtel, senior product marketing manager at Vignette, puts it: "Internet TV is on the rise. You only need to look at the recent success of the BBC iPlayer and services such as Sky Anytime to see that. Gone are the days of broadcasters airing programming without regard for the viewer's schedule. Consumers can now watch the content they want, when and where they want."
What is more, this phenomenon is here to stay. Recent statistics from Research & Markets indicate that the volume of IPTV subscribers will rise from 14.3 million in 2007 to 63.6 million in 2011. This market will be worth more than $20 billion, and Europe will be leading the way. While forecasts from industry experts may differ slightly, they all agree that the IPTV market will continue to grow at a rapid rate.
While the initial impact may be on broadcasters, the rest of the media industry needs to sit up and take notice. Internet TV, or IPTV as it is also known, will affect telecommunications providers, advertisers, even e-retailers. Like all major technological advances, it brings great opportunities, not least the opportunity to personalise the viewing experience. This personalisation is in its infancy, and there are still many challenges to overcome, but the potential is enormous, and those who make the right moves now will reap the rewards in the coming years.
Advertisers have led the way in the personalisation of online content. For example, Hiro Media uses viewer preferences to provide targeted advertising to the viewer. Ariel Napchi, co-founder and chief executive of Hiro Media, explains how it works: "Upon downloading a Hiro show or film for the first time, the user is asked a series of questions, which are designed to establish what types of ad he or she is interested in seeing."
He continues: "Then, during the film or show, viewers see ads. These are much shorter than traditional ad breaks, and are always matched to the viewer's stated preferences. For example, if you were buying a house, you would only see ads for estate agents and mortgage firms. Then, a month later, when you have bought your house and moved on to buying a car, you'll only see BMW and Mercedes ads."
While in its early stages, this concept is already finding customers. BT Vision is trailing Hiro's solution for its BT Vision Download store; NBC's dotcomedy.com site launched with Hiro last year and Israel's leading broadcaster, Reshet, released a catalogue of its most popular shows with Hiro in October 2007. According to e-Marketer, 2010 turnover in the US internet video market is expected to be around $3.1 billion, up from $225 million in 2005, a growth of well over 1,000 per cent.
Barry Llewellyn, vice-president of sales and marketing at Packet Vision, another provider of managed advertising services for IPTV, comments: "IPTV is going to change the face of TV advertising for broadcasters, agencies and advertisers."
He continues: "The bi-directional functionality of IPTV networks will give advertisers instant feedback on viewer profiles and ad viewing that could enable them to change ads as well as give the sort of instant measurability that is currently only available on the internet. It will also enable more defined targeting, such as capping the number of times a household sees a particular ad, or showing households episodic ads, such as the Nescafe Gold Blend series, in the order intended."
Neil Morgan, vice-president EMEA, channels and marketing for Omniture, says: "The impact on advertisers will be huge. Advertisers, who have traditionally looked to TV to promote brand messages, have had no real measure of how effective the medium is, other than recall and viewing statistics. But now, with the convergence of TV and the internet, they get all the reach of TV, with the measurability and targeting potential of the internet."
We are now about to see the same principle of personalisation applied to IPTV content - to the programmes themselves. Babelgum, a 'next-generation global internet TV network', will launch in the spring. Valerio Zingarelli, its chief executive, explains: "Babelgum uses peer-to-peer technology to provide the immersive viewing experience and picture quality of traditional TV, with the interactivity and personalisation enabled by the internet."
He continues: "The (IPTV) industry, although new, is following the usual growth path. Users are already moving on from the early adopters and their catch-up service, and are looking for a service that will give them free, on-demand and personalised channels." Furthermore, Babelgum has the ability to learn users' viewing habits. It gathers intelligence from viewer choices to suggest similar programmes the viewer might enjoy.
This personalisation of content will bring major benefits, not only to UK viewers, who will at last be able to use a service that Americans have long enjoyed through TiVO, but also to advertisers. No longer will they have to book space based on generalised viewer research. They will be able to deliver advertising around specific programmes and clearly stated viewing preferences. Critically, internet TV will allow advertisers to combine the granular targeting of online advertising with the emotional draw of television.
However, the personalisation revolution won't end there. It opens up a whole new area of exploration. Jed Murphy, digital director of Carlson Marketing, says: "A recent Independent/Spectrum survey estimated that, by 2012, only one in two people would be watching TV when it's broadcast. The rest would 'timeslip' their viewing either through the use of personal video recorders or video-on-demand services. Therefore, broadcasters and media owners need to adopt personalisation and to embrace the techniques of the direct marketing world."
Jonathan Guthrie, chief executive at telecoms provider MGt, agrees. He says: "Sure, there will be the gadget geeks who will be happy to spend hours scrolling through content menus to create their own schedules. But the vast majority of consumers won't have the time or patience. So the challenge for IPTV providers is how to bring the benefits of personalisation to the masses."
But Guthrie has an idea of what the solution is: "The answer is to create a hybrid version of personalisation that will start with generic channels and become ever more granular, based on the long-term mining of viewer profiles. Underpinning all of this will be advanced CRM systems that combine subscriber-management, payment and data-mining capabilities."
Anyone who is sceptical about how this could happen need only look at what Real Time Content is doing with online advertising. This spin-off from BT is working with companies such as Nationwide to take online ads and make thousands of variations, each designed to appeal to a specific segment of the audience. Chief executive, Naj Kidwai, says: "For the Nationwide 'Proud to be Different' campaign, we created 16,000 variations. This produced a 48 per cent increase in awareness and a 400 per cent increase in click-through rate."
Chief technical officer, Ian Cameron, explains how they acquire the all-important segmentation data: "There are four levels. First, there is what users tell us they want to see. Second, there is the technographic information. This includes whether they're on a Mac or PC; what their IP address tells us about their location, and the time of day. Third, there is the behavioural and contextual data that we buy from third parties and tells us about the historical tendencies of a user. Finally, there's data about the third-party site where the ad appears."
It is easy to see how, in theory, this approach could be applied to personalised IPTV content. However, in practice, it is far from simple. The first problem is the reliability of the data.
Cameron reports that while the data provided by users is entirely reliable, the same is not true of the three other types of data. For advertising, which viewers are accustomed to screening out, this is not a significant problem. However, for TV content, it would be more of a problem.
Indeed, some observers are sceptical about whether consumers would want anyone telling them what programmes they want to watch. As Rachel Melson, co-founder of Media Matrix, a media consultancy, argues: "Who wants to log on to be told it's time to watch Gordon Ramsey stuffing a chicken, or the pros and cons of toddler potty training, when you're focused on getting your report written and to the boss on time? Content is content whether it is digital or not. People will find what they want to watch, and watch what they enjoy, whether it is pushed at them or not."
These problems are above and beyond the core issue that IPTV faces - digital rights management. Greg Pryor, senior associate at law firm Reed Smith Richards Butler, says: "From a legal perspective, the key issue affecting the growth of the IPTV market is uncertainty of rights. There is uncertainty over distribution rights in relation to the differences between forms of IPTV. There is uncertainty regarding DRM versus non-DRM content. These issues, coupled with dated legislation, have led to slower growth in the IPTV sector than might otherwise be the case."
However, despite all these challenges, it looks certain that media owners will attempt to introduce the principles of CRM to internet TV. This is simply because the potential rewards are so great. Not only will it give a major boost to advertising, but it will also boost their margins. As Murphy explains: "In terms of paid-for media content, the latest movies, TV shows and chart music are always used as loss leaders, with multiple competing channels driving down margins. Serving up more exclusive, targeted content allows media owners and distributors to be able to charge a premium and drive up margins."
Then there is the potential for internet TV to converge with other media. It seems as though every technological advance in the past decade has been heralded as the one that will transform the mobile phone into something more than a telephony device. IPTV is no exception.
David Lancefield, TMT partner at PricewaterhouseCoopers, enthuses: "IPTV is the hotbed for true convergence. For IPTV to start making money, it will require telcos to transform, both culturally and as organisations, into areas that until now were occupied by media companies. Content acquisition and advertising sales will need to become core competencies for every telco launching IPTV."
However, perhaps the real possibility for IPTV convergence is between the home computer and the television set. Paul Hague, managing director of digital video store BiBC, says: "Internet TV should not be confined to the PC. With so many consumers wanting a home-cinema experience and content on the go, the need for media convergence is paramount to the success of personalised TV."
Compared with overseas, the UK has some way to go to catch up in this area. While here we talk of IPTV as a PC-based experience, in France and the US it is predominantly happening on the TV screen. France has two million households signed up to receive TV through broadband. In the US, AT&T and Verizon are the big players in a market that is having some early successes in providing an alternative to standard cable offerings. It will be interesting to see how this market develops in the UK.
We can expect to see many other developments in IPTV in the coming months. Light outlines yet another possibility for this area: "There will be a much greater focus on interaction and transaction. The interaction will allow viewers to get more out of their viewing experience by being able to move from the programme they are watching, into additional related areas of content that they find interesting. Or you will be able to transact, moving straight from the video into buying related merchandise or content."
He offers some examples of what he means: "You might be watching a National Geographic programme, see something of particular interest and then move out of the linear broadcast to more specific information that related to that point in the programme. Or you could immediately download a music track to your PC and ringtone to your mobile while watching MTV. Or, by clicking on a moment in Desperate Housewives, you could buy a pair of Prada shoes that a character in the show is wearing."
It remains to be seen whether consumers will really engage with this concept, or whether it requires too much of an internet "sit forward" approach to television, which has traditionally been "sit back". However, it does look certain that IPTV will continue to grow in popularity.
Christian Mahne, head of Lansons Live, believes that improved technology will drive the continued growth of internet TV. She says: "Better bandwidth and better compression will allow better quality video that looks more like what we see on the wall. Much of the resistance to watching video clips on computer monitors has faded, but there is still an appreciable quality lag with TV. So people are at the moment less likely to sit and watch long programmes on their computers, but this will change in the foreseeable future."
There is then a great deal of uncertainty surrounding this new area. Much of it remains at the theoretical stage, but it is a theory that is getting people across the sector excited. Two things seem certain - internet TV has a future, and it will not be dull.
E4 DRIVES VOD UPTAKE WITH EXCLUSIVE SKINS PROGRAMMING
On 2 February, E4's hit drama Skins became one of the first TV series to begin with a purely online episode.
The cult show, which follows the lives and loves of a group of young people in Bristol, began its second series with a full episode split into four segments and shown at www.myspace.com/e4skins. The first segment was shown on 2 February, with segments two and three following on 7 and 8 February, and the final part made available on 9 February.
However, that was not the end of the online build up. Fans could watch the entire first episode in one place at www.e4.com/skins between 10pm and midnight on 10 February, before the show was first broadcast on E4 at 10pm on 11 February.
As part of the collaboration with MySpace, Skins is being given a heavyweight advertising presence across the social network in the UK. This includes extensive homepage advertising. The programme and website appear to be natural partners, with the Skins' MySpace community boasting more than 110,000 friends.
Sarah Martin, marketing manager for E4, says: "An ongoing and important part of E4's strategy is getting programming out to where our viewers are, and it's great that we're able to reward Skins fans by giving them the chance to watch it ahead of it being on the channel."
MySpace UK views it as an ongoing partnership. Dom Cook, its marketing director, says: "MySpace UK can offer massive exposure to partners such as Channel 4 and play an important part in driving both viewing figures and engaging a dedicated fan base."
Throughout the ten-week series, MySpace and E4.com will also screen Unseen Skins, a series of short online specials. They will feature new young writers and directors. The first Unseen Skins was directed by Skins star Nicholas Hoult.
UEFA MEDIA STREAMS 125 MATCHES TO 120 COUNTRIES
Uefa, the governing body of European football, recently began working with NTT Europe Online on the design and delivery of a service that would stream its matches to online viewers. As Daniel Marion, head of technology at Uefa Media, explains, the project had to overcome several challenges: "First, the solution had to guarantee its broadcast partners that it could protect their digital broadcast rights over national and regional boundaries while maintaining IP and content security on the notoriously borderless internet."
He continues: "Second, the online video service had to be completely reliable and capable of supporting huge numbers of simultaneous users, especially on match nights. All parties were clear from the start that one fault could damage the service for good in the eyes of its audience. Finally, if football fans were going to use the service, it would have to provide a high-quality experience."
In order to make the service available to as many football fans as possible, broadcast partners in Europe are encouraged to make live matches available on the internet as well as TV. Aware that not all broadcasters had the in-house technology or infrastructure in place to do this, Uefa and NTT Europe Online developed the Uefa Video Service.
The groundbreaking service enables more than 35 broadcasters to stream live Uefa football matches online, providing football fans in more than 120 countries with access to 125 matches per season, including all Uefa Champions League matches.
It uses national and regional geo-blocking software so Uefa can maintain complete control over who can log on to each broadcaster's service. It uses Smart Content Delivery technology to give enough on-demand bandwidth to cope with peaks in usage. Finally, to prevent individual problems disrupting the user viewing experience, NTT Europe Online provides Uefa Media Technologies with a multi-lingual match night support centre, manned by a dedicated team of 30 customer service representatives.
Marion concludes: "Football is the number-one sport in the world. Billions of people across the world support the game. We need to be providing the best possible service for our partners and football fans worldwide. By investing in the latest content delivery technology, we will achieve that goal."