The pay TV business thinks it’s about to cash in on a new revenue stream.
A Comcast (s CMCSA) executive predicted Wednesday at a New York media conference that advertising impressions served within free video-on-demand content will increase tenfold over the next year. This would be a major evolution for a nascent cable/satellite VOD programming sector that, according to a March report issued by research firm TDG, only accounted for 2.4 percent of the 3.6 billion hours of pay TV viewing done in the U.S. during 2010. (Multichannel News produced and reported on the event; paidContent did not attend the conference and reported on it based on a Multichannel post.)
Also read: The missed opportunity in cable VOD
“We have 400 million monthly VOD views on Comcast. I’d love to have a dollar for every view,” said Chip Meehan, VP of Western region integrated media sales for Comast, speaking at the Multichannel News/Broadcasting & Cable On Demand Summit in New York Wednesday. (He was quoted by Multichannel.)
Meehan said Comcast is in the process of working out contracts to sell this advertising time with program suppliers. The cable company has already reached a deal with The Walt Disney Co. (s DIS).
“Once the first couple of them are figured out, you can assume the rest will follow,” he said. “If Comcast and Disney can figure it out you can assume we’ll figure it out with others.”
Also read: Why Canoe abandoned ship on interactive ads
The sweet spot is in basic cable programming served over VOD that subscribers don’t have to pay extra to watch. Comcast is looking to share ad revenue with programmers for those views.
To monetize it, Comcast — along with the larger pay TV industry — is developing dynamic ad insertion technologies that allow it to place commercial inventory in a more strategic, granular way. Besides providing for a more lucrative business opportunity, this spares VOD viewers from having to view the same spot over and over again.
Comcast currently has 17 million of its nearly 20 million digital TV homes enabled for such dynamic ad insertion.
In order for the business to take off, a lot of other things have to get done, too.
Speaking on the same panel, Joni Kinsley, VP of advanced advertising product placement for digital media services company Avail-TVN, said companies like her own need to develop faster workflows so that cable programming can get into the VOD window in time to capitalize on Nielsen’s C3 rating.
For example, if say, an episode of TNT’s Dallas premieres on Tuesday night, having it available on free VOD the day after would enable any VOD ad impressions to be sold within the show’s metric currency, which counts on-demand viewing three days after initial broadcast.
Also, of course, Kinsley noted that such free VOD offerings need more promotion from programmers and cable companies to get subscribers to use them.
In the end, it’s hard to tell how much new wealth VOD advertising will create for the TV business. Cable programmers will likely see their linear ratings drop as their audiences migrate to free VOD viewing. And, of course, the fact that they’ll be sharing ad revenue from these channels with pay TV service providers will undoubtedly come up in carriage negotiations.