Converging TV and Online Through the Mouse

The mouse might really be on to something. Last week, Disney released more details about how it’ll stream episodes of four popular shows — “Desperate Housewives,” “Lost,” “Alias,” and “Commander in Chief” — the day after they air. The shows will be shown for free, but with commercials that can’t be skipped.

And that’s the kicker. By offering the shows for free and embedding commercials viewers have to watch, Disney is opening itself up to a whole new market that until now had been lost to it. Stealing TV by downloading commercial-free torrents or movie files has been on the rise for a while now (though not always to the shows’ detriment). PVR (define) usage has been slowly gaining in popularity, and one reason seems to be that time-shifting viewers don’t have to watch commercials. In fact, a recent Nielsen study finds only about 1 percent of viewers using PVRs watch commercials when viewing shows in time-shifted mode. One percent!

Clearly, tech-savvy viewers (also the ones most likely to want to watch shows on their computers) are actively trying to find ways to get around commercials. At the same time, this year’s March Madness proved viewers who can’t watch shows at home are perfectly comfortable watching them on their computers if they have the chance, even at work. On March 16 and March 17, at-work viewers of streamed games on amounted to 510,010 and 401,983 viewers, respectively.

People want video content, and they’re perfectly willing to watch it on their computers if they need to. Disney’s move to stream popular shows means it will gain viewers it never had access to before, and it will serve these folks commercials in a way they can’t get around. Sure, viewers may be able to grab a snack when the commercial’s on, but that’s always been the case. Regardless, Disney’s move goes a way toward recapturing eyeballs lost due to technological advances and file sharing.

Disney’s foray into on-demand Web TV is slated as a two-month experiment. Other broadcasters, such as Nickelodeon and Comedy Central, have been experimenting with similar arrangements for a while now. Though broadcasters such as HBO have been sending letters to ISPs and their customers whom they detect are downloading HBO shows via BitTorrent, Disney is taking the more economically sensible tack of returning the business model to where it was before: providing commercial-based, free TV.

This is just the first step. Two other major advantages of merging TV with the Internet are the ability to accurately measure usage and to serve up ancillary content, such as shopping opportunities, cast and character information, and promos for other shows in an interactive format that’s a lot more powerful than simply running trailers. Advertisers can get real numbers about viewers and their habits, networks get extra ad income by driving viewers to other related content, and consumers get what they’ve wanted for a while now: more control over their viewing by time and place. It’s a move that makes total sense.

This is just the tip of the iceberg. Two new German startups, shift TV and offer glimpses into what might be TV’s future in a networked world. Both have struck deals with German TV companies to allow users to use their browsers as virtual PVRs, recording what they want via a Web-based interface, then watching those shows later streamed through their browser (or even downloaded into a portable digital video device). Consumers get total control over their viewing experiences, and, depending on the technology used, networks and advertisers can still serve up the commercials they need to keep making a living.

And things could get even more interesting as more time-based applications come online. As Charlene Li of Forrester points out, Google’s new calendar service offers a pretty unique platform for time-based applications. Though she points to revenue opportunities in terms of selling contextual advertising based on people trying to set up dates and outings, it’s not that much of a stretch to imagine Google’s calendar tied to TV scheduling and personal virtual PVRs, where one could plan viewing in an integrated calendar. Click a button, schedule your viewing, and go. It’s the digital ecosystem at work.

Until now, the TV industry (and the entertainment industry in general) has been fighting a losing battle against the consumer behavior trends that want to decouple content from time and presentation. Moves like Disney’s that work with the technology and the trends rather than against them are what will work in the long run.

Join us for our Online Video Advertising Forum in New York City, June 16, 2006.

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