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Tuesday, November 23, 2004

The New York Times > Business > Media & Advertising > Advertising: Advertisements You Didn’t Demand

The New York Times > Business > Media & Advertising > Advertising: Advertisements You Didn’t DemandVIDEO-ON-DEMAND has reached a critical mass, and advertisers have taken notice.

Once mostly a stomping ground for pay-per-view specials like "Wrestlemania," video-on-demand has grown to provide both paid and free content of all sorts, so far without advertisements. But Fox Cable Networks and Visa plan to test the ad waters in January.

The trial will be "Behind the Mysteries," a show that is scheduled for Jan. 24, 25 and 26 on the National Geographic Channel before becoming a free on-demand offering. The channel has been offering free video-on-demand content since October 2002, but has never included commercials. Viewers who choose "Behind the Mysteries," however, will see either 60-second Visa spots before and after the program or Visa commercials throughout.

"Video-on-demand is starting to get to a tipping point, in that the total universe of video-on-demand homes in the United States is about 17 million," said Steve Schiffman, executive vice president for marketing and new media at the National Geographic Channel, a joint venture between Fox Cable, which is part of the News Corporation, and the National Geographic Television and Film unit of the National Geographic Society

"Part of the test, candidly, is for Visa and for us to get a read of what is an appropriate way to offer a commercial approach within video-on-demand."

Michael J. Wolf, global head of the media and entertainment practice at McKinsey & Company, agreed that video-on-demand will become a significant way for consumers to find and watch programs. "From an advertiser's perspective, what makes this an incredibly attractive advertising vehicle is that you know the consumer actually selected the program," he said. "And especially if there are fewer ads, even if fewer people are watching, those impressions can be much more valuable."

Cable companies, too, are increasingly staking their futures on digital services like video-on-demand - with seemingly little choice. Comcast and Cox, two of the nation's largest cable companies, for example, recently attributed their strong third-quarter results to growing demand for their digital video services and high-speed Internet connections.

"There are a growing number of ways the viewing public can spend their time now that are really outside the traditional commercialized vehicles that we know and love," said Christopher C. Geraci, director for national television at OMD in New York, the media agency for Visa and a unit of the Omnicom Group. "The bottom line is, it's taken them away from the normal commercialized stream of television, and we're eager to get in front of them."

OMD has been at the fore of exploring new advertising techniques as technology changes the game. This summer, for instance, the agency arranged for 11 of its clients' products to appear in episodes of the mini-series "Five Days to Midnight" on the Sci Fi Channel.

But that project involved traditional television, where commercials are expected. The question now is whether consumers will welcome commercials in content that they believe that they control, said Alan Bezoza, a cable analyst at the New York office of Friedman, Billings, Ramsey.

People using TiVo and other digital video recorders expect to be able to fast-forward through commercials, and people who select free on-demand programs on cable expect to see no commercials at all, Mr. Bezoza said. "Unfortunately, they're used to it by now."

The test will take place in more than 90 markets served by Comcast, Insight Communications and Time Warner Cable, part of Time Warner. Its organizers expect 150,000 households to take part each month during the three-month test, sometimes repeating viewings or watching more than one episode, for a total of 250,000 views each month.

Expectations of viewers' reactions are less clear. To that end, the program will incorporate a contest which viewers can enter online. "The ads will say please come online and get a chance to win this fabulous trip," said Lou LaTorre, president for advertising sales at Fox Cable,. "In registering, they will be asked a series of questions, still in development, about their perceptions of video-on-demand, advertising in video on demand, degrees of acceptability, image, associations."

The test may not answer all the questions that need answers, but small moves are better than none, Mr. LaTorre said. "This is a legitimate first step."

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