Streaming Media - 2008 Industry Sourcebook - (Page 26) industry update Apple iPhone Fitch noted that “healthy political and Olympic spending” would keep traditional television advertising afloat in the upcoming year, and he warned not to count out the large broadcasters any time soon. “Fitch believes geographic and product diversification (coupled with strong liquidity) moderate the volatility of consolidated cash flow and afford the conglomerates the flexibility to adapt as endmarkets evolve … these companies have the flexibility to … return capital to shareholders, make prudent acquisitions and endure a cyclical downturn in several units concurrently while keeping their credit profiles intact.” NBC serves as an example across several categories. The broadcaster owns U.S. broadcast rights to the Beijing Olympics, which will begin at 8 p.m. on Aug. 8, 2008, so Fitch suggests the company will bring in sizeable advertising revenues during that time frame. Yet, with almost a year to go, the company also chose to engage in a very public dispute with Apple over iTunes video pricing. An NBC executive cited a desire to prevent Apple from having leverage to drive pricing models for online videos as it has for online music as the source of conflict. NBC’s intent—to use advertising models to push online playback of its televised series—seemed like a good plan, and all NBC video content was removed from the iTunes Store, except for a few shows that were distributed by independent producers or distributors. NBC followed up by making the current episodes of its shows available on its own sites, using traditional advertising models to drive revenue. Within a week of the content being yanked from iTunes, though, a writer’s strike began that has since forced NBC to begin to give back advertising dollars as viewership drops off. Many of this season’s shows, the ones that NBC would show online with its advertising model, ceased production and ran the few 26 STREAMING MEDIA INDUSTRY SOURCEBOOK 2008 episodes already completed or never even started production. NBC accounted for almost 40% of iTunes video downloads, which means the broadcaster derived decent revenues from the purchases. But along came the perfect storm of issues, which now leaves NBC with a back catalog that it can sell only through physical DVD distribution or some other paid, online download sites—the very issues the writers struck over—and limited current advertising revenue from its “reality TV” replacement shows. Will NBC recover? Absolutely. This morality play, though, drives home another point Fitch made: “[T]raditional media is expected to continue to cede share of overall spending as advertisers continue to experiment with and become more comfortable with emerging and alternative mediums (online banner/search, social networking, mobile, cinema, video game, etc.).” The shift, already well underway, will continue forward with dichotomous advertising models growing: aggregated viewerships (such as traditional broadcast television and cable TV) and highly targeted, highly engaged viewers, which can be found on social networking sites and other key internet properties. Online media advertising models flourished throughout the year, just as online media subscription services deteriorated. At the Streaming Media West show, several panelists on Jose Castillo’s “TV’s Last Gasp” session pointed toward three equally appealing types of online video advertising: preroll (content played before a viewer watches the intended video), postroll (ads played after the intended video), and interstitials (like traditional broadcast, where ads are inserted at key points in the video). NBC.com http://NBC.com
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