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How to make a TV commercial vanish

Here’s the trick question of the day: How do you make a 30-second mid-roll commercial break within a cable VOD stream vanish?

The answer: stop watching the on-demand video stream before the mid-roll break ever happens. When that happens, the video stream gets interrupted and the session gets torn down. So do the advertising breaks that were supposed to be planted within the forthcoming content.

It happens all the time in the online video space, where completion rates for requested videos vary wildly. But in the advanced cable advertising environment, there’s an extra complication that has to do with the business relationships between TV networks and local cable companies.

It goes like this: In the traditional linear-TV world, national cable networks give 2-3 minutes of ad time to their cable affiliates to sell independently. Those local ad breaks are stitched into the network feeds, where they wait patiently to be filled with a 30-second commercial for a bank, restaurant, auto dealer or other (usually) local advertiser. Even if they go unsold or (shudder!) unwatched, they’re still there as a guaranteed, sellable asset that helps cable companies defray the high cost of program licenses.

New world
The same can’t be said in the brave new world of dynamic ad insertion into VOD streams. If a viewer hits “stop” during an on-demand episode of, let’s say, “Sons of Anarchy” from Fox Cable Networks, it’s as if any would-be ad breaks never even existed. That means the local inventory allotted to the cable company can’t be monetized at all.

That’s just one of the wrinkles that will come into play as dynamic ad insertion into myriad sorts of video streams catches on with cable networks and their local affiliates. Although several recent high-profile cable network rights deals make allowances for local ad inventory over new, multi-screen platforms, there are still unanswered questions about exactly how those ad assignments will translate – and how cable companies will go about creating the technology fabric that makes it possible to include local ad spots in new extensions of video networks they distribute.

Another example involves delivering video content to tablets, which is a service most large cable companies now offer. The most efficient way to send a bank of live TV channels to an iPad is to encode the groom the signals in a centralized way, then transmit them in a unified stream set to every cable headend. But doing so removes the myriad combinations of local advertisements that otherwise appear across the hundreds of ad-serving zones the cable industry maintains. At the other extreme, creating a unique digital stream for every tablet-ready version of a cable channel that includes local advertising is a mathematical and capital expense nightmare. Time Warner Cable, for one example, maintains more than 300 discrete ad-serving zones over 34 television markets, each featuring unique combinations of local commercials.

Then there’s the conundrum of the so-called TV Everywhere movement, which makes cable network programming available on PCs and other non-traditional video screens. Although networks appear to be willing to assign local ad availabilities to their affiliates in the same way they have in the traditional linear world, there are questions about how local ad inventory will work if, for instance, a Cox Communications customer chooses to watch a program directly from a network’s website and video player. If the customer comes to the network site as an authenticated/authorized Cox video subscriber from a Cox-associated address in Phoenix, for example, ideally the customer would see local commercials pertinent to that zone. But again, creating thousands of versions of the program stream to accommodate the patchwork tapestry of local ad combinations is unworkable.

These are some of the scenarios that ad-technology developers are contemplating. Jeffrey Sherwin, the founder and CEO of Denver-based This Technology Inc., thinks the business rules surrounding local inventory allocation in TV’s brave new world will create a market for intelligent ad-insertion systems that can associate the correct commercials into the correct video content without the need to recreate thousands of separate stream versions. In other words, the same infrastructure that’s used to dynamically place ads into VOD streams on the TV set can be devoted to getting localized ads on iPad video feeds, for example. “You can use the same dynamic infrastructure to manage play out on every single iPad…without having to backhaul the streams,” Sherwin told me in a briefing last week.

It sounds…complicated, but Sherwin says splicing video across multiple infrastructures is the future of cable advertising in a multi-platform world. “It’s not just possible,” he says. “It’s being done now.”

If that’s the case, it means the questions going forward have more to do with business modeling and economics than technology capability. Operators will have to figure out for themselves whether investing in the infrastructure to replicate local cable commercials on iPads, or to devote that inventory to something else entirely, or to just let the avails go unfilled, makes sense. As for that problem of the disappearing mid-roll ad break, I suppose the good news is there’s always going to be another VOD stream ready to cue up.

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