TV On Demand: does it justify its premium status?

A couple of years ago, I was asked to produce a document to demonstrate why TV on demand airtime CPMs were worth 4-5 times average spot rates. To say that was one of the most difficult presentations I’ve ever produced would be a massive understatement.

In fact, my conclusion was that, although a TVOD premium could be defended, it was really hard to see how it could be so much more expensive. I concluded that the price differential was heightened by trading issues, where TVOD rates could be used to fine tune airtime deals which might otherwise not be met.

As such, I predicted that the differential would fall with each new trading season until a more realistic +30%-50% level was reached.

How wrong I was. I have since learned that a TVOD rate of 4-5 times average spot rates is still not uncommon, although I have still seen very little evidence to support that level of premium.

This seems so counterintuitive. In 30+ years working in broadcast media, I have never known a new entrant to command a premium, much less one that is used primarily as a frequency filler and, combined, accounts for less than 5% of the overall supply.

The benefits of VOD are pretty well-known. It does attract a younger, more upmarket audience of lighter viewers – although no more impressive in profile than many mainstream programmes on boring, old TV channels via the schedules. That may be why very few of the campaign analyses I have seen have shown uplift for total TV reach via TVOD of more than 2%-3%.

It is also a less cluttered environment and is watched by people who have chosen to watch, rather than those who have ‘drifted in’ via the EPG (although the number of channels available now means very few programmes are watched by default anyway).

Both of those factors could create an uplift in engagement, although this has yet to be categorically proven and is unlikely to be several times more engaging than spot advertising.

One of the arguments in my document of a couple of years ago was that TVOD advertising may have a similar positive effect to sponsorship, with many early TVOD viewers convinced the programme had been brought to them by the one or two advertisers in the pre-roll; however, the increase in advertising minutage around TVOD programming coupled with the loss of TVOD’s novelty value has probably reduced that effect somewhat.

Finally, there is the much-proclaimed argument that TVOD brings the viewer closer to interactivity; they are only a click away from buying the product or creating a deeper relationship with the brand. I would love to know of a TVOD campaign that has achieved this to any significant scale so far, so I think we’ve got to put this argument under the heading of ‘maybe one day…’

Of course, this doesn’t mean that TVOD airtime is ridiculously expensive for what it offers. It could just as easily be said that scheduled TV airtime is ridiculously cheap.

But one thing I can pretty much guarantee; scheduled, spot advertising is not 4-5 times less valuable than TVOD, per viewer reached or commercial impact. In fact, I’d go so far as to say that, in pure communication terms, the 30 second spot can often be more valuable than the on demand pre-roll; after all, it is nearly always consumed on the best screen, with other people, in the best room in the house.

But, then again, 30 second spots have been with us since Winston Churchill was Prime Minister, whilst TVOD is the shiny new(ish) kid on the block. But, until the broadcasters provide some compelling evidence regarding TV on demand’s unique power to influence consumer behaviour, I will remain sceptical that newness is an adequate reason for such a premium on the pricing.

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