October 2004 - Digital Media in the United Kingdom

We all know what happens when media is in short supply, but what happens when there is too much? It’s time to look at the growth of interactive applications in the digital broadcast DRTV landscape.

By Henry Scott

In the United Kingdom (U.K.) and Europe, there is a growing abundance of cheap and effective digital media that is changing the way we as direct response marketers operate. Digital satellite as a delivery mechanism in the United States is still relatively small; however, the increased flexibility and functionality of the digital delivery of channels means that direct marketers in the DRTV market need to understand how to use it.

In the U.K., there are only 24 million homes, however, over 50 percent have multi-channel digital TV. With government guidelines in place to switch off the U.K. analog broadcast signal by 2012, we will see 100-percent digital penetration in the next six or seven years. In 2004, Sky satellite will account for 7.2 million homes, digital cable will reach 2.4 million homes and digital terrestrial “free view” will support 3 million homes. These TV packages comprise of up to 300 channels, including premium channels such as movies or sport. Of these 300 channels, approximately 100 are both free to air and free to view (i.e., no encryption required and no subscriber fees for the end viewer).

The commercial reality means that it is relatively cheap to broadcast a 24-hour shopping channel and have access to 7 to 10 million viewers. On paper, this sound great but in the U.K., there are now 39 active shopping channels across sectors, including traditional live shopping channels, live auctions, as-live presentations and, of course, infomercial channels. If anyone had projected 15 years ago that people would sit and watch whole channels of nothing but advertisements and infomercials, we would have questioned it.

Yet, that prognosticator might go on to predict that not only would people want to watch ads, but there would also be a choice of nearly 1,000 hours per day across 39 channels-24 hours a day, seven days a week. One reason that this has happened could be that the time, effort and budget that go into most international infomercials eclipse any budgets for digital TV program productions and, hence, the output of the infomercial channels is often much more compelling than the so called “entertainment” programs.

The real issue this creates is a need to market those channels, deliver compelling product presentations backed up with solid customer service and delivery reputation, as well as look for economies of scale in the broadcast arena. For example, one particular U.K. company operates four 24/7 shopping channels and has spent the past five years building a TV shopping destination and brand as well as using the airtime to put four of its products in front of one viewer at one moment in time.

What the company discovered was that this ability to broadcast in “parallel” dramatically increases its chances of closing a sale. Therefore, a customer who is channel-surfing the sector could have watched four bites of four different products in less than 20 seconds-dramatically increasing the conversion from that one customer at that one point in time.

This is all well and good, but with the rollout of digital TV distribution comes new technologies and ways of marketing products that are just not available in the analog or traditional cable TV distribution worlds.

One of the most promising growth areas is in interactive television (ITV) and the digital “Web TV” services it brings both to viewers and retailers alike. This means full integration of database-driven information is inserted into the live broadcast stream so that the viewer can combine the traditional use of the TV as a viewing device with some of the functions readily available on the Internet, for instance.

In the U.K., the uptake of ITV services is impressive even in its short history For example, during the final episode of the hit television show, “Big Brother,” 22 percent of all votes were cast using ITV applications. In addition, more people voted for their Big Brother cast member via interactive technology than those who voted in the local government elections. What do these startling figures reveal? People really like it and it works. However, it only “works” if the TV content is intrinsically linked to the ITV application prompted. In other words, ITV can make people do more of what they were about to do, but it is unlikely to actually change people’s fundamental usage of the TV in the short term. Many companies have ignored this fact when creating new Internet businesses, allowing the technology to drive the market ahead of consumer acceptance.

Interactive Television Quick Facts
92 percent of all digital satellite viewers have used/viewed ITV applications.

22 percent of all votes cast in 2004 for the United Kingdom’s version of the popular television show, “Big Brother,” used ITV applications.

More people voted for the “Big Brother” finale via interactive than voted in the local government elections in total.

It is believed that 20 to 25 percent of QVC U.K.’s Sky TV orders are now taken via ITV applications.

At the beginning of 2004, 31 percent of people recalled seeing an interactive advertisement and of those, 48 percent
of people responded.

Source: Simply Media TV

In order to illustrate the potential impact, let’s examine Simply Media’s ITV application (tv-iStreet) as an example. The main function is to shrink viewers’ broadcasting picture to a quarter of the size and then present other text and pictures to viewers, while they still watch TV on the quarter screen. By doing this, it allows direct marketers to fulfill the following three basic uses of the application:

To be able to present multiple products in front of one viewer, at any one time. Searching, special offers, category browsing and purchasing can all be done without leaving the channel you are watching. The compelling audio/visual message of the infomercial keeps the viewer focused on the product and purchasing can all be done while you are watching.

To “white label” the application to any entertainment-based channel that wishes to sell products and services to their viewers. (i.e., create an incremental revenue stream as a “shop in a box” plug-in)

Give customers another way to order-such as, by phone, mail or the Web. Often, the end of an infomercial is the strongest sell. Therefore, there is a lot to do before the ad ends, such as writing down the number or URL. With ITV orders, the viewer only presses one button on the remote control and then continues looking at, or ordering, the product without missing the programs after the infomercial.

In addition, working with the broadcasters to deliver revenue is vital to ensuring better response rates from the media and furthering relationships with the channel owners. Without access to good quality media, the business is dead and with high-street brands driving up DRTV prices, direct marketers must look at all avenues for increasing response rates in order to compete.

Before travelling the road to digital media, it’s important to weigh the advantages and disadvantages. Reasons to proceed may include:

PC/TV Convergence is now actually here. Basic Web functions, including commerce, are well used in markets like the U.K., where digital TV delivery penetration is high. However, DRTV companies need to embrace all channels for securing incremental orders.

Margin improvements. As customers enter all their own data, the orders can be fulfilled without the need of the call center order-taking costs. There are, of course, customer service calls in the same way as there are when ordering via the Internet-typically saving $2-$3 (U.S.) per order.

Response rates. Some orders will be cannibalized by existing orders, however, for some, this will be a preferred method to the Internet or phone. This is further increased by having the ability to carry on ordering while watching the next feature, which is a major benefit to TV viewers. In an initial crude test conducted by technology partners and Simply Media TV, the study found that an additional 9 percent of orders via DRTV could be derived from the Sky platform. Assuming 50 percent are incremental orders and 50 percent are cannibalized, order rates rose by 7.5 percent and added a further $2-$3 per order, on 9 percent of orders by bypassing the call-center requirement on orders. More tests are required as this is only a small snap-shot, but it does illustrate that there is both a new way to take orders and one that is more profitable than phone order taking.

Customer data security. As credit card details are not processed over the Internet, it removes one of the historical barriers to buying goods over the Web. The return path is a secure walled-garden data line between the broadcaster and the set-top box-meaning the latent security phobias about credit card misuse experienced by the Internet are not as prevalent helping the uptake of the technology.

Multiple product presentations. Once in the ordering process, complementary products are shown and the viewer can browse through the entire catalog before, during or after the initial product sale at no extra cost to the broadcaster (assuming the return path call is a customer-paid number rather than toll free).

What should you be wary about when it comes to the digital media landscape? You should be aware of the following:
The investment. Any broadcasting platform is typically proprietary in design and the skills and scope for developing good-looking applications are in short supply. You cannot test this kind of activity easily, so it’s all or nothing on a platform-by-platform basis; and therefore, it must be part of an overall strategy to invest in new media sales channels.

Over designing the application. The first and most fundamental function should be closing the sale-everything else is a distraction. It may be nice to look at but it could be a commercial distraction and expensive to develop.

Suppliers. Make sure you pick a supplier with a proven track record in developing transactional applications on a platform-by-platform basis. Often, suppliers advertise themselves as providing “platform neutral” solutions, however, that is rarely the case due to the idiosyncrasies of each platform’s operating system.

Manage your expectations on functionality. The ITV applications of today are slower to respond and restrictive in their functionality and graphics compared to today’s Web development. Set-top boxes are designed to decode pictures, not to primarily render graphics and perform complex routines, as undertaken every second by your PC. This means that the range of tasks you can do are often limited, but if you stick to the basic premise of “closing a sale,” it is still very efficient.

Manage your expectations on response. Interactive technology is likely to be a cost center initially, if you include set-up costs. But the day-to-day running costs are easily exceeded by increased response rates and margins. This is a new and growing technology, and viewers in different territories will have different levels of exposure and usage- meaning it is not without risk.

The explosion of digital media creates an explosion of shopping TV alternatives. This, in turn, creates the strong need for both channel differentiation and for increased yield per minute. For the DRTV industry, the necessity to embrace all and every method of extracting incremental sales from our media is key, and ITV applications will overtake Web orders in the next five years as a direct ordering method of digital TV platforms. As direct marketers, ask yourselves what strategy you have for the 300-digital channel environment.

Henry Scott is CEO of Simply Media TV in the United Kingdom. He also is an ERA European Board member. Please send your questions or comments to [email protected].


No Comments

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a comment