VOD – an extra choice or a serious threat?

Newsline columnist Raymond Snoddy wonders whether VOD will drop traditional broadcasters in “deep do-do” …. possibly not!?

The predictions from PricewaterhouseCoopers on the future of video on demand (VOD) this week seem eminently plausible.

VOD, the consultants suggest in a new report, will account for around 15 per cent of total viewing by 2014. Unless appropriate online advertising strategies are urgently adapted traditional broadcasters can kiss something like £280 million goodbye.

This is serious stuff and is the equivalent of losing around a further 10 per cent of revenue – rather like suffering the effect of another recession on top of the old familiar one.

Deep do-do time once again. Do the challenges never end?

Then there is the additional subtlety that even if traditional broadcasters do manage to get their act together on VOD advertising the impact is unlikely to be immediate. Even then it will not be possible to show as many ads as on traditional TV.

To keep their heads above water broadcasters would have to be able to charge a very large premium of up to three times the standard rate for a TV ad, something that doesn’t sound at all possible.

PwC should be congratulated on avoiding the wilder shores of foolishness. They have not succumbed to the usual temptation to declare, as some have, that TV channels will all be dead in five years.

Indeed PwC partner David Lancefield has even emphasised that their figures absolutely do not mean the death of traditional  television. A very large market would remain. There was just that little problem of the missing £280 million.

Naturally newspapers grabbed the report as a perfectly respectable “Sunday for Monday” story and warned broadcasters faced the challenge of an “armchair revolution”.  Newspapers always like a revolution of some sort.  It’s just that this VOD revolution has been around, at least in embryonic form, for rather a long time.  Eventually even the most modest of revolutions have to show their face in some form other than future aspirations.

So far the evidence is perfectly clear. Patterns of viewing of traditional television programmes have changed little in the past 40 years other than to rise a little thanks to the personal video recorder.

Is that about to change in a significant way?

First there is the boring bit about defining terms. Most current VOD simply involves using technology such as the iPlayer to catch up with favourite programmes which have been missed.  If anything, this merely underlines the importance of the content created by traditional broadcasters rather than suggesting any fundamental revolutionary change.

Would this involve a loss of advertising impacts? Possibly not. Rather like the PVR – another scary revolution from a few years ago that was supposed to devastate advertising earnings – additional viewing has compensated for any increased use of fast-forward through the ads.

Real VOD, the pulling up of new material via the internet from non-traditional sources remains a tiny slice of overall viewing.  Much of this is accounted for by the viewing of short clips such as YouTube often watched in employer’s time.

Everything could yet change of course but so far you would have to say that the progress of VOD companies has been disappointing.  Joost was supposed to lead the “armchair revolution” and has  largely failed to do so. In the UK, Blinkbox looked like a clever idea and is still fighting it’s corner.  But it has hardly made the big breakthrough in terms of awareness and perception.

Meanwhile, the more basic usefulness of LoveFilm, mainly distributed via DVDs and the post continues to spread by the word of mouth of contented customers.  Hulu, which is expected to come to the UK soon, could be the vehicle to transform the VOD market but mainly because it is  able to offer top quality licensed content from all the main American broadcasters. You cannot ignore a company which groups NBC Universal, News Corporation and Disney and one that will be able to cut out the middlemen.

We will not get an accurate picture of the future of VOD while it remains partly “trapped” in computer distribution.  Only when VOD is effortlessly and seamlessly transported to large HD screens in the way that cable can already provide can we take its true measure.

The technology already exists and the BBC Trust has given VOD a considerable boost with preliminary approval for the Canvas project – if the competition authorities can resist  meddling and trying to stifle a British innovation at birth.

Will it all add up to 15 per cent of viewing by 2014?

Almost certainly not if you exclude all the catch-up viewing watched soon after the originally scheduled broadcast although true VOD will continue to rise. It’s an extra choice.

As to the missing £280 million lets hope that turns out to be  exaggerated.  Commercial broadcasters can ill afford such a hit to their programme-making budgets.  They will be praying it turns out to be alarmist.