by Dave Zornow
Published in Cable Avails magazine, June 1993
I wouldn't be surprise if the next major cable multimedia deal involves The King himself. ElvisVision, a join multimedia venture between Mr. Presley, a major MSO and several Silicon Valley companies, could produce interactive entertainment and multimedia programming opening new marketing opportunities for advertisers and media outlets. "Sure I've been dead for over 15 years," says Elvis, "but this marketing opportunity was just too good to pass up."
OK, I admit this flight of multimedia fantasy was more in the style of a supermarket tabloid than the serious study of cable business. But many industry veterans think the recent hype regarding interactivity and multimedia might be just as much of a fantasy.
At last check, Apple, IBM, Microsoft, Sega, Time-Warner, Viacom, TCI and several regional phone companies were among the contenders who had thrown their corporate hats into the multimedia ring. And this incomplete list doesn't include information providers and hardware vendors, all of which see major marketing opportunities in interactive media.
But what do all of these ventures have to offer that isn't already on Prodigy? The Sears-IBM system, which offers a similar suite of services on PCs to what interactive proponents want to provide through cable, has received lukewarm interest from consumers who already own another high tech object -- a personal computer.
And what does the new interactive revolution offer that the old interactive revolution didn't? "When you look at the list of options, it sounds like an old list," says Hal Krisbergh, President of General Instrument Corp.'s Jerrold Communications Inc. Krisbergh was involved in PlayCable, a joint two-way cable venture with toy maker Mattel Inc. which was shut down after a three-year run in 1984. Industry veterans, burned by projects such as Telaction (JC Penny show at home service, R.I.P. 1989), Viewtron (Knight Rider teletext project, R.I.P. 1983), and INDAX (Cox Cable's interactive program service) are suspicious of these new multimedia ventures, saying that although the technology has improved, the consumer hasn't changed very much.
Beyond the hype, it's unclear who will pay for these new services, and whether there is enough of a market to support all of these new players.
Who Will Pay?
The cable industry will first look to the consumer to pay, but it's not clear if consumers will want to add more to their cable bill in this era of rate roll backs. "How much is the viewer willing to pay? Maybe not too much," says Erica Gruen, Senior Vice President of New Media at Saatchi and Saatchi.. "Time-Warner's Quantum experience may be showing us the viewer may not be willing more to pay more for these services."
Nick Rhodes, Vice President Business Development at Prime Ticket, thinks consumers will buy into the new technology because it will change the way we look at television. "Consumers will ultimately spend more on TV when they feel more in control of their own choices." Rhodes says today's pay-per-view and video an demand technologies are "archaic" compared to what's down the road. "It's still a foreign concept to most consumers to 'buy' a PPV movie, yet they're renting five tapes a month from the video store, going to the movies, buying video game cartridges and going to concerts." Rhodes, who is evaluating interactive applications for sports programming, says consumers will come around when technology puts them more in control of what's on TV.
More for Less or Less for More
Today's players in the network cable business were first attracted to the medium by the notion that cable's targeted audiences and minimal waste would justify higher CPMs . Half of that prophecy proved true; agencies use network cable to reach narrow demographics such as teens, 25-34s, or sci-fi fans, but they usually pay a lower CPM for cable than broadcast. For some categories, network cable CPMs are almost 50% lower than broadcast.
Will advertisers spend more for these new features? "I don't think advertisers will pay more to be in an interactive environment," says Gruen. "It gets down to a supply and demand issue. People won't pay more unless there's a scarcity of something alot of advertisers want."
One company with first hand experience selling interactivity is The Box, a basic cable service which uses 900 numbers to let consumers pick music videos. "Interactivity has given us a niche by creating a unique selling point," says Neal Frank, President of Marlin Entertainment, the rep firm providing ad sales for The Box. Frank says The Box doesn't get higher rates for its viewers because full interactivity isn't here yet. "Long term, we will be able to command a premium on a CPM basis when cable can provide true interactivity and more valuable information than broadcast outlets."
"If it turns out that cable can provide a new media that sells product, it will justify a new pricing structure," says Lynn Bolger, Vice President of Corporate Media Research at Foote Cone and Belding. "The whole question of audience verification hasn't been addressed. Saying and delivering are two different things. "BBDO's Senior Vice President of Media Research Stuart Gray agrees. "A decision to buy should be based on whether or not there's any value -- and that's based on reasonable testing."
Where's The Beef?
At Prime Ticket, Rhodes says this verification will be the real hook for the advertiser. "The ultimate winner will be the advertiser. Interactive TV will remove any lingering doubts about the effectiveness of audience delivery. Advertisers will obviously pay more for effective reach against the target."
New Century Media is a startup venture which is attempting to substantiate the benefits of the new technologies by creating a "test bed" for advertisers to examine how advertising will work in the 500 channel environment. "As soon as you add interactivity and addressability you've got a direct response medium," says CEO Bill Harvey. "The ability to database and manage this subscriber base will move spot cable beyond traditional TV." Harvey believes these new capabilities will eventually justify higher CPMs than broadcast, for both spot and network cable. "Spot cable will become the most interesting medium out there. It already is charging excessively high CPMs, but in the future it will be able to justify them."
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Dave Zornow is President/TNG Research, a media research consultancy and applications development company that works with media sellers and research providers.
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