CBS’ Poltrack: Online Video Could Be More Valuable Than Live TV

Online video streaming remains a tiny part of TV viewers’ media consumption, but Dave Poltrack, CBS’ research head, has noticed trends that could make premium broadband ads more valuable than broadcast spots. Taking a panoramic overview of viewing data from Nielsen, MRI and CBS’ own internal research, Poltrack see more older viewers starting to watch online video in greater numbers, suggesting that the form is becoming mainstream and that ad dollars should follow suit. He used the research to back up a presentation to the Television Critics Association in Pasadena this week (B&C has that story). We’ve got the full deck and have mined it for you to find the latest on valuing digital ads, viewer behavior online and more (View select slides here or download the full presentation):

Valuing digital ads: At the center of the study was an attempt to figure out how to wring dollars from digital video. Right now, broadcast is by far still the most profitable, followed by DVRs and then online. Keep in mind that an average hour-long prime-time show has about 10 minutes of ads — or roughly twenty spots. About 95 percent of a program’s audience sees the ads live, so the average live viewer is exposed to 19.5 ads. DVR viewers tend to skip a little over one-half of the ad. A DVR video gets a significant amount of playback during a three-day window covered by Nielsen’s C3 DVR ratings. That means the network only gets revenue from 44 percent of the ads — the equivalent of just 8.8 ads. But streaming videos tend to include about two minutes of ads, and even though those have an exposure of practically 100 percent, online videos have ad value of just 4.0.

Pricing premium online video: If that was the point where the discussion ended, there would seem to be little hope for the viability of professional video. But online ads contain important differences. Unlike linear TV, online videos tend to capture a more attentive audience — and it’s one that can be more easily targeted. Such ads command a premium price. Poltrack: “If we assign a 20 percent price premium to an online ad, we only need four minutes for the online option to outperform the DVR playback option. With a 40 percent premium, just 3.5 minutes are needed.”

Long-form video’s looking better: When you talk about long-form video, you’re mostly talking about watching ad-supported TV shows, followed by movies. Right now, Poltrack says that only 51 percent of broadcasters’ shows are streamed online. That number is expected to grow, as long-form video becomes more mainstream. Looking at June ’08 vs. June ’09, long-form video grew at a faster rate than short form, according CBS-commissioned research from Nielsen; the format was up 36 percent in unique users, and 32 percent in average length of viewing occurrence, resulting in a 150 percent increase in time spent viewing. Taking a larger view, long-form video streaming increased its share of all video viewing from 19 percent to 27 percent during year-over-year.

Catching up: Online program viewing is largely incremental to television viewing. For the most part, people turn to broadcasters’ online video to catch up on missed episodes of favorite shows or episodes of a series that the viewer does not currently watch on TV. That’s rounded out by watching repeat episodes of shows they already saw and tuning in to fare that’s no longer on TV.

Short form still rules: But long form is still the exception, not the rule. In May, Nielsen said that the average video streamer was exposed to 75 streams lasting just an average of 2 minutes and thirty seconds only.

Video in perspective: tiny viewing portion: In the portion of Poltrack’s report titled Internet Video Goes Mainstream, the CBS (NYSE: CBS) researcher cites Nielsen data that online streaming still only represents 1.1 percent of all video activity in the average U.S. household and just 1.7 percent in the average broadband-enabled household. That suggests that TV’s dominance is secure for the time being. However, there are interesting areas of growth. He offers a comparison of four sets of video viewers — TV Centric viewers who have digital TV, but no broadband; Fully Connected individuals with both; Web Centric consumers who have only broadband; and the Old School, who have no digital TV or broadband. The Fully Connected group is now the major segment, rising to 38 percent from 25 percent by last fall, while the Old School shrunk by 10 points to 25 percent.

Little difference between user-gen and pro: In general, user-gen still dominates online video format, according to the CBS Entertainment Panel, which measured responses from nearly 3,500 participants last month. About 83 percent of the all participants said they either downloaded or streamed a user-gen video in July. That was followed by free professional video views (71 percent). Lagging far behind: paid professional video, such as streaming movie rentals or pay-to-download studio fare. Only 13 percent of the respondents saying they parted with their money to watch an online video. Those patterns tended to track the age groups, though 18- to 34-year-olds were mostly likely to pay to view a video, with 20 percent having done so last month.

Seniors’ choice: DVR: About 53 percent of the 55-plus crowd have a computer with internet access, according to the CBS Entertainment Panel’s data for July. Not surprisingly, a slightly higher percentage preferred to get their digital video from DVRs. When asked what technologies they used over the past three months to watch digital video, 55 percent of those in the older category said DVR/TiVo (NSDQ: TIVO). By comparison, only 4 percent of those in that age group said they watched video on an Mp3 player.

Seniors start streaming: Older viewers are increasingly less “old school,” Poltrack says. If you look at the rate of growth in the Fully Connected set, the greatest gains are in the 35- to 55-year-old columns. And those 65 and up are starting to show significant movement as well, as video streaming adoption among 18- to 34-year-old stabilizes.