MEDIACOM Marketing Digest 24 August 2004

MEDIACOM Marketing Digest 24 August 2004

24 AUGUST 2004

Sky & The PVR Sky Television released their Annual Report last week, complete with lots of positive statistics in terms of subscriber and advertising revenue growth, increases in audience numbers, etcetera, etcetera. What caught our attention, however, was the news that Sky are planning to launch a digital hard drive recorder "over the next year".

In case you haven't been paying attention, this gadget (also known as a Personal Video Recorder or PVR), which records TV shows to a computer hard drive, is the most significant new offering in the home electronics market since, well, the VCR. The PVR - of which the best known brand is the TiVo - allows viewers to record shows for later replay, just like the VCR. Where the PVR differs from its predecessor, however, is that "later" can mean just a few seconds later - you can start watching a show even while the PVR is still recording it. And you can set up the PVR to record a whole series of your favourite programmes, or even a category of programming - it gathers its recording criteria from a constantly-updated Electronic Programme Guide, so you don't have to agonise over start and stop times or other such trivia.

As we've noted previously, PVR owners watch more television, because the device captures shows which they might like to watch but would normally miss. Unfortunately for us marketers, alas, PVR owners also watch fewer ads, thanks to handy dandy technology which allows viewers to skip merrily past ads, a minute at a time.

Sky have long proclaimed their desire to offer a PVR with (or as part of) their set-top box, but this time they're serious. At the Annual Report presentation they talked about likely costs and CapEx allocations. This time it isn't vapourware.

And not a moment too soon - across the Tasman, Microsoft are gearing up to offer their Media Centre Software Suite from October, with NZ undoubtedly on the agenda sometime soon. The Media Centre, which has been available in the US for some time, is part of Microsoft's efforts to claim the lounge, and includes a PVR as the hub of its offerings. Other players in the PVR arena include Sony - whose Playstation PSX, now on sale in Japan, includes PVR capability - and a number of other lesser luminaries, including Topfield, whose PVR has twin tuners, allowing you to record two channels at the same time!

Why is it so significant that Sky are going to offer a PVR? Because, thanks to the provisions of the NZ Copyright Act, Sky control the programme listings for all their channels - and, thus, control most of the potential content for the Electronic Programme Guides which are the heart and soul of any Personal Video Recorder offering. Without Sky's co-operation, the PVR just won't happen in New Zealand.

Will Sky make that content available to other players? No official word yet, but our view is that Sky will, once their own box has been successfully launched. Sky CEO John Fellet noted that they plan to make their PVR box "revenue neutral", effectively offering it at cost to their subscriber base. With that philosophy, it makes perfect sense to enable others to carry the hardware costs - Sky are, after all, in the software business (ie providing TV content), not technology, and any offering which encourages more TV viewing has got to be good for the Pay TV business.

What can advertisers do to prepare for the PVR-enabled environment? The ostrich approach is a popular choice, and one which we confidently predict most TV advertisers will adopt. On the agenda of the more far-sighted, however, will be a basket of options, including:

* looking for association with live events such as rugby, etc, which are best experienced live (and thus not PVR'd to the same extent);

* evaluating sponsorships and other product placement opportunities within programmes, rather than skippable ad breaks; * exploring interactive television initiatives, taking advantage of digital television capabilities to develop a two-way relationship with potential customers; * more focus on niche channels - US research shows that PVR owners are less likely to skip through commercials on channels with which they have a certain loyalty - specifically including Animal Planet, CNN, ESPN and E!; * and (our personal favourite, because it's so subjective and largely unattainable) making TV ads that are more appealing than the programmes!

UK research reveals that many PVR owners do not watch advertising (27%), and if they do it's because they find the commercial entertaining (92%); while 69% say they will watch if they are interested in the product.

Feel free to twiddle your thumbs until the arrival of the PVR sometime over the next year or so. But please don't say you weren't warned.

Sky To Get Into DVD Rental Still with Sky: another surprising action to come out of the Annual Report presentation: Sky will be getting into the DVD-by-mail business! It was only a matter of time until an 800-pound gorilla got into that sector - who would have guessed it would be Sky?

The model, as pioneered in the US by NetFlix, is simple (and we have covered it before now):

* pay a flat monthly fee (current NZ pricing level: around $39 a month) * choose a list of DVDs you wish to rent; * you will be sent the top 3 available titles by mail; * watch them, send them back, receive the next three; * repeat ad infinitum.

At first glance, it's an odd business for Sky. But then, as John Fellet observed during the presentation, it's a curious anomaly that mail is the most cost-efficient downloading technology currently available! If Sky are to develop their Video on Demand offerings further than their current Pay Per View model, then a downloaded Video On Demand service makes sense. And, in the absence of an affordable broadband option, mail downloading fits the bill.

Of course, once a Sky household is equipped with a PVR, and if fat-pipe full-speed broadband ever becomes affordable, then Sky will have the customer base, the movie library and the preference data (aka "my list of movies I'd like to see") to build a dominant position in the On Demand service.

Who would have expected such machiavellian planning from a publicly-listed company?

What's the Big Idea? Ever had business ideas that you've never had the time or money to execute-- inventions, products or services that would make money if only given a chance? If you were given US$10,000 to create a profit, could you double it? Triple it? Turn it into a million? Introducing The Big Idea, an exciting new US TV show in which teams of 2 compete for a prize determined solely by vision and drive.

The programme makers are looking for dynamic partnerships. Two people who have strong synergy, an unquenchable desire for success and a business idea that you can execute in one week . Potential contestants should demonstrate tenacity and determination under pressure. This is your chance to turn your big idea into big money.

To apply, each team should submit a 10-15 minute video that showcases your personality, business plan and what makes your team unique. They want to see you in your element. And they want to know why your idea will work. Send DV or VHS submissions and both team members' applications to:

The Big Idea 10401-406 Venice Blvd. #710 Los Angeles, CA 90034

Fax: 310-202-1502

For an application, any inquiries, or to send photos, please email thebigidea@actualreality.tv

Text2WindUpInCourt Last month we noted that the new Gambling Act has major implications for the Text 2 Win offerings currently in vogue. Last week we received a "clarification" from Internal Affairs. We'll let the legal eagles John Swan and Susan Peacock from advertising lawyers Gilbert Swan take up the story from here:

"The Department of Internal Affairs has entered the debate on the effect of the Gambling Act 2003 on sales promotion schemes particularly in the texting environment.

"The debate has been a storm in a tea cup because in reality nothing has changed from a compliance perspective.

"The only value to be found in the media release from the Department is acknowledgement by the Department that 'normal costs of mailing or texting a sales promotion entry are acceptable'.

"A strict interpretation of the Act does not provide this comfort but it has been the advice of Gilbert Swan to its clients that a court in any prosecution bought under the Act would not apply the law and its penalties over the cost of a postage stamp or a standard text message charge.

"The Department's media release contains hints of a desire to conduct social engineering in that the dangers of the introduction of gambling to young people is highlighted. This is a red herring to marketers wishing to conduct sales promotion schemes but a warning to Telcos tempted to undertake 'call stimulation' exercises using the text medium.

"In summary it's business as usual for those wishing to employ sales promotion schemes as part of their bag of tricks. The debate has stimulated the interest of the Gaming & Censorship Regulators who are at pains to suggest the taking of 'professional, independent legal and financial advice'. If in doubt, seek that advice rather than find yourself as a 'test case' under the law of unintended consequences."

We happily endorse that point of view, but also raise the question: exactly what are the "normal costs" of texting? The 50 cents or $1 entry cost that marketers have typically charged? The 20 cents that it usually costs to send a text message? Or the 2 cents a message that it costs users of Telecom's monthly $10 Txt package? Seems to us there's plenty of ambiguity still attached to the whole issue, joyful news to the ears of litigators everywhere! That reply-paid card option is looking pretty attractive round about now.

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Forget CRM, Think Customer Service Two-thirds of American consumers are willing to pay more for selected services in exchange for better service, despite lower prices being a primary reason for switching service providers, according to a new survey by Accenture.

The survey of 1,000 US adults aimed to determine levels of customer satisfaction and loyalty across 17 industries. It found that nearly two-thirds (65%) of the consumers surveyed are willing to pay more for better services from some industries, including managed healthcare, airlines and hotels.

However, only a small proportion of consumers seem willing to pay more for any individual service, as 20% represented the greatest portion of surveyed consumers who were willing to pay more to any one industry for better service.

VoiceMail Kills OK In terms of better service, 27% said they would switch providers to gain access to a live customer service representative rather than being forced to use an automated voice response system or web site - a reason for switching that was more frequently given by women than men.

When asked about factors that would lead them to switch providers, 16% said they wanted more reliable or better service, and 24% emphasized lower prices. The least frequently identified reason for switching service providers was "an advertising message".

Who rates best? The research also generated a customer service industry ranking, based on the percentage of consumers who said they are generally satisfied with the service they receive from the industries examined. Postal services, banks and utilities ranked the highest, with 44%, 42% and 41% of respondents respectively. Consumers, it seems, are generally satisfied with the level of service they receive from organisations in these industries. However, travel agencies (16%), car rental companies (19%) and online retailers (19%) ranked the lowest for satisfaction with the customer service provided.

The 17 industries included in the study were: airlines; banks; cable/satellite TV; car rental companies; government agencies; home telephone service providers; wireless telephone service providers; hotels; Internet service providers; life insurance providers; managed healthcare providers; the postal service; utilities; store-base retailers; online retailers; shipping companies and travel agencies.

We don't have to look too far to find horror stories in our own country. Virtually all the same seventeen categories showcased above would provide ample fodder. Not much point putting a huge amount of time and effort into acquiring new customers if you're just going to frustrate them away ...

Sender ID is on its way IDG are reporting that Microsoft Corp. will soon put some bite into its Sender ID antispam plans by checking email messages sent to its Hotmail, MSN and Microsoft.com mail accounts to see if they come from valid email servers, as identified by the Sender ID.

The company is strongly urging email providers and Internet service providers to publish records that identify their e-mail servers in the domain name system by the middle of next month. According to IDG, Microsoft will begin matching the source of inbound email to the addresses of e-mail servers listed in that sending domain's SPF record by Oct. 1. Messages that fail the check will not be rejected, but will be further scrutinized and filtered.

Spam has become such a problem that it was inevitable that heavy hitters such as Microsoft would take some hardline measures to deal with the issue.

For legitimate marketers, Sender ID and similar technologies won't be a problem - but going forward we will all need to ensure that the systems we use to connect to the internet and send email are compliant with the various measures being used to curb spam. Even this much-sought-after newsletter already has a constant battle with spam filters and other protection measures! Who would have thought?

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We create media solutions that build business for a wide range of local, regional and worldwide clients.

With $13 billion in global billings, a commitment to strategic insight, total communications planning, tactical media brilliance and tough but creative media negotiating, MEDIACOM provides unsurpassed value in today's chaotic media marketplace.

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