A summer of discontent

Rhys McLachlan, commercial development director at Videology, who will be on the Screen panel at our Media Playground event, says the commercial video-on-demand market has been growing rapidly in 2012 but the trajectory for the summer could be downwards thanks to the BBC…

This has been a fantastic year for video-on-demand. We’ve seen massive growth in overall volumes and a significant rise in the number of unique viewers.

Great content such as Britain’s most talented canine, Pudsey on ITV.com, the Gypsy Wedding shows on 4oD and Big Brother on Five have helped to create consumer demand.

Content reach has expanded thanks to a proliferation of new platforms such as Virgin Media’s on-demand services and Sky Go. An increasing number of VOD-friendly devices have played their part, indeed 6% of Videology impressions in Q1 went to directly to the living room HD TV, via either SmartTV’s or gaming consoles.

In 2012 VOD viewing has become a mainstay of the household entertainment buffet.
But rather than celebrating that hard work and achievement through the summer, before we build up to an even better performance in the autumn, we are compelled to consider a summer of angst. We are facing six to eight weeks when viewing to commercial inventory for video-on-demand could be decimated.

Of course, viewing always drops in the summer as the lure of the sunloungers and barbecues cannot be ignored, but in 2012 the BBC’s shadow over the commercial industry will be even more keenly felt. Its ‘perfect storm’ coverage of both Euro 2012 – admittedly shared with ITV – and, more detrimentally, the Olympics could curtail consumer demand and viewing numbers to commercial VOD sites.

We expect to see a spawning of nostalgic and related content channels that will look to cash in on the anticipated halo effect that occurs, but the onus is very much on these publishers to get their content strategies right and understand their audiences better in order to drive viewing and revenue (cue obvious Videology plug…).

Advertiser interest is likely to be significantly down – early market forecasts suggest that overall video budgets are estimated to drop by 6-7% and it will take a lot more hard work for the VOD community to rebuild interest and investment after such a significant dent.

The fact is that the UK market for key events, and particularly sport, has become a duopoly, dominated by broadcasters who don’t rely on the advertising market. There is of course the BBC, who thanks to the licence-fee ‘tax’ benefit from a staggering £3.7 billion annually, regardless of the economic climate.

The only other UK broadcaster who can bid for most sports is Sky as a result of the war-chest they’ve built on the back of their hugely successful subscription business, and, of course, even Sky are forbidden to bid for listed events like the Olympics.

ITV and C4 might protest – and the fact that Channel 4 has secured the Paralympic rights is a significant bright spot for the late summer – but their lower and more variable budgets mean they have to be more selective about the sports they target.

Of course, we need to acknowledge the BBC’s work in making video-on-demand mainstream via its initial promotion of iPlayer four years ago. Its use of promotional slots on the BBC, driving viewers to the iPlayer, was worth an estimated £40 million to the product, based on equivalent ITV1 airtime prices.

But what it’s doing now highlights the need for a new broadcast player to compete for video-on-demand rights, a player with the cash and reputation to be perceived as credible by rights issuing bodies.

It surely can’t be long before Google steps into such markets. It has the cash and the cache to be a real player. It also has a track record as a sportscaster via YouTube’s broadcasts of the Indian Premier League and even early round FA Cup matches, to name but two. It also has a clear mechanism for monetising the value of the content it broadcasts. The day when it becomes a player in the UK market may be sooner than we think.

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