For HD, Size Matters

Cable World,  Oct 24, 2005  

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Can little HD become a mass-market reality? Not if advertisers concentrate only on numbers.

By Mavis Scanlon

Hi-def programming mesmerizes viewers, but not advertisers-at least not yet. Some say antiquated audience measurement systems make it difficult for advertisers to tell who's watching. For others, measurement systems are beside the point-not enough people subscribe to HD networks, period, for advertisers to jump in.

"By and large, what I am not hearing is client-initiated conversations of any scale for high-definition channel advertising," says Tim Hanlon, SVP, Publicis Groupe Media. Hanlon blames audience measurement systems, which he says do not pick up the vast audience fragmentation occurring with HD.

The problem goes beyond HD. As the masses are segmented into dozens of tiny audiences through on demand and increased PVR and interactive usage, there's more need for systems that will measure set-top box tuning data, Hanlon argues.

"The issue with [HD] networks...is that there aren't enough homes [subscribing]," says Brad Dancer, VP, research, at National Geographic Channel. HD networks fall far short of the 20-30 million subscribers that will move the needle to even a fractional household rating on a Nielsen meter.

A recent Horowitz Associates survey of 800 cable or satellite subscribers in digital cable markets shows 38% of digital cable subscribers and 17% of satellite subscribers get HD service from their cable or satellite company. That translates to 19% of cable subscribers and 19% of all multichannel subscribers.

Paradoxically, the current buzzword in the ad industry is "engagement," shorthand for the theory that it's vastly more valuable to an advertiser to reach one attentive viewer than 100 inattentive ones. And nothing is more engaging in the TV landscape than high-definition programs. "So if advertisers and the industry are clamoring for engaging scenarios," Hanlon says, "high definition seems tailor-made for that."

But the vast majority of advertisers and agencies have shown little interest in HD. That means a lot of HD channels, even as they obtain satellite and cable shelf space in coming years, will find it challenging to get advertisers to subsidize the investments they've made in programming and equipment.

The advertising industry "can handle broad-based linear television channels north of whatever that magic Nielsen number is," Hanlon says, "the problem is that increasingly we're seeing a growing percentage of programming and or viewing activity that doesn't fit that category. The traditional response from the agency business is 'if it doesn't fit, put it on the side.'"

Advertising and Content Development

Networks that simulcast their standard-definition feed on an HD channel get around the audience measurement problem by selling spots on both the standard and hi-def channels for one price.

"We won't be pitching HD individually" since advertisers aren't interested in the small HD audience alone, says John Ford, SVP, programming, at National Geographic Channel, which plans to launch an HD simulcast in early 2006. The standard-def/HD aggregate will be "much larger" than HD, he says. National Geographic has been producing virtually all its content in hi-def since February.

Programmers are incurring the heavy investment needed to produce hi-def content to supply what some viewers want-and, hopefully, what all of them will. Right now "it's more of a quality of audience sale and not really a ratings sale," says Jean-Briac Perrette, SVP, new media, and CFO, NBC Universal Cable. "There's a cost to us of upgrading the equivalent of our plant," he says. License fees and, perhaps eventually, advertising revenue, will help cover those costs.

At NBC Universal, Perrette is seeing more interest in sponsorships, such as the Dew Action Sports Tour on Universal HD. Given that the HD space is fairly new, it allows for more creative advertiser opportunities than are available with a standard-def network, he says.

The roughly 5 million-strong audience for high-definition programming in the U.S. "is as high quality an audience and demographics as an advertiser can possibly have," Perrette says. "And despite the fact that we don't have the ratings to back up the take rate and the eyeballs and the viewership that a show has to hit, it is an inherently great place to have a brand profiled."

Like Perrette at NBC, Hanlon argues marketers must be willing to accept HD, despite the lack of measurement-to take it on faith that the HD audience is an engaged, attentive group. Eventually the advertising community will take his not-so-subtle hint. Maybe.

Time Warner Cable's Bandwith Solution

Cable operators are still analyzing the best way to dedicate more bandwidth to HD. Time Warner Cable and Comcast are taking different routes- Comcast is testing different technologies, including compression, while Time Warner favors digital switching. Another tactic is shuttling premium channels to the digital tier. Until operators go to an all-digital platform, however, it's going to be difficult for them to have robust HD offerings.