Interviews with Digital Media Thought Leaders
Why Project Canoe Will Fail
Podcast Video | Posted by Phil Leigh on July 1, 2009
Click Here to Download a Free Prospectus
Click here to download to iPod or iPhone
If you would like to learn why the Cable Industry’s effort to provide addressable advertising will fail, this video is for you.
Last year a consortium of six leading CATV operators formed a joint venture termed, Project Canoe, to develop a standard platform to deliver addressable and interactive commercials over cable systems. The industry is abundantly aware of the threat that Internet targeted advertising represents and Canoe is their response.
In our analysis there are five reasons it will fail.
First, video will ultimately migrate to the Internet. Eventually, the TV will evolve into a giant window into the Internet Cloud where video is merely one of many accessible applications. Consumers will favor the Net’s anytime, anywhere access as well as the interactivity. Ultimately even sponsors will prefer the ad flexibility of the Net in terms of addressability, interactivity, and spontaneous e-commerce.
Second, video advertising will evolve more quickly into successful models on the Internet than in within closed networks of CATV systems. Technical standards on the Net are open and well understood by independent developers. Thus it is likely that more of them will focus on Internet advertising innovations than on those governed by Project Canoe where standards have yet to be defined. The trial-and-error process of innovation will be much faster on the Net where consumer reaction can be quickly measured.
Third, cable networks like ESPN and A & E are suspicious of Project Canoe. Perpetual tension exists between cable operators and cable networks over the issue of carriage fees. Project Canoe enables CATV systems to charge a fee to the cable networks for ad targeting which is the reverse of the directional money flow for carriage fees. Although the operators are justified in collecting a fee, it is an unwelcome change in the power dynamics for the cable networks.
Fourth, theoretically the CATV industry could have moved forward with targeted advertising ten or twenty years ago. They’ve certainly talked about it long enough, sometimes in high profile announcements and discussion. Yet in reality they have done very little. Thus, there is reason to question their commitment this time as evidenced by the abandonment of “community level” addressability recently.
Even if the commitment is taken at face value, there is reason to question their technical readiness. Put another way, during all the years of discussing the promise of ad targeting they may have let their systems drift in a sort of entropy toward a technical Tower of Babel that Project Canoe cannot unify.
Finally, just two weeks ago Project Canoe abandoned a much publicized planned feature that would have enabled households to be targeted at a “community level”. The decision is significant for two reasons. First, until now Canoe aggressively promoted the capability in nearly all of its public comments. Second, the Project confessed that the variety of networks and deployed equipment among consortium members was too disparate to unify into a workable technical standard.
Categories: Podcast Video
Tags: Addrssable Advertising, Cable Networks, Canoe Ventures, CATV Operators, future-of-advertising, Future-of-Television, Market Research, Project Canoe
Permalink | Email This |
Leave a Comment
If you would like to make a comment, please fill out the form below.
[...] Project Canoe will fail. So says Phil Leigh, Senior Analyst at Inside Digital Media in his new 71-pa… I’m sure this news will be viewed as disappointing for David Verklin and his team. [...]
This pessimistic outlook for Project Canoe is grounded in the author’s obvious but misguided bias against cable. The claim that “video will ultimately migrate to the Internet” presumes that cable will evaporate in the Cloud, and that cable operators will not be major players in online video, even as they begin testing “TV Everywhere” with their programmer partners. While video on the Net is growing, cable is not going away anytime soon. TV advertising will continue to be a far bigger generator of revenue than video on the Net. Players like Project Canoe, Invidi and Backchannelmedia are laying the groundwork for more targeted and interactive ad delivery.
There are many reasons why video will migrate to the Internet as discussed in our earlier market research report, Third Generation Television.
However, one unanticipated catalyst is that consumers are connecting their laptop computers to flat panel TVs thereby converting the TV into a dual-function device. It remains a TV as we have always known it, but it also becomes a giant window into the Internet Cloud.
Essentially the laptop becomes an Internet Gateway for the TV. Its on-board WiFi connects via a home network to the Internet thereby enabling unlimited Internet access on the TV. A remote mouse and keyboard provides a lean-back viewing experience 15 – 20 feet distant from the TV screen.
The uninitiated nearly always dismiss the set-up as “too geeky”, but in reality it is easier to connect a laptop computer to a flat panel TV than it is to connect a cable set-top box, or even a TiVo as documented in the video linked below.
http://insidedigitalmedia.com/third-generation-television-first-catalyst/#more-413
The laptop-as-Internet Gateway is not the end game. Instead it is a forcing factor that will ultimately lead to browser-centric TVs or something like the Apple TV with an iPhone-like apps store. Nonetheless, once consumers experience unlimited Internet access at the TV they will never accept a Walled Garden of content. They will regard it as a Walled Prison.
Cable operators will thrive in Third Generation Television, not by charging twice for Internet Access, as TV Everywhere implies, but by providing lightning-fast Internet speeds and dropping carriage fees. Cable networks will learn to profit from advertising innovations that will proceed far more quickly on the Net than Project Canoe can ever hope to match.
You say that “once consumers experience unlimited Internet access at the TV they will never accept a Walled Garden of content. They will regard it as a Walled Prison.”
1. There you go again. You can always spot a cable basher when he rails against the “Walled Garden”.
2. Some 100 million households have surrendered to lockup in a “Walled Prison” of content by paying for cable/satellite/FiOS.
3. So-called “unlimited” access to content on the Net happens not to include access to most of their favorite TV shows.
4. “TV Everywhere” does not as you say mean “charging twice for Internet access” but making access to those shows available at no additional cost (beyond the subscription fees they already pay) on the Net and mobile devices.
5. Newspapers took advantage of those wonderful “advertising innovations” online (like cookies and popups and popovers?) only to find that they were gushing red ink. Show me the money in Internet video.
6. Don’t get me wrong, I love the Net. So do all those subscribers to broadband connections from cable. And I love Web video — I’ve been putting video online since 1996. But don’t sell cable short. And you can bet that operators won’t be taking your advice to drop carriage fees — they’d sooner jump out a window in the Comcast tower in Philly.
Although there are nearly 100 million cable subscribers today two other statistics are significant.
First, anyone suggesting that the newspaper industry will not shrink merely because it presently has nearly 50 million subscribers makes an obviously spurious argument. Perhaps 10 years ago some newspaper executives reacted like Steve by labeling those who forecast the ensuing decline as “newspaper bashers”.
The same applies to cable TV. From a technological perspective, both newspapers and CATV networks are evolutionary dead-ends. While newspaper subscribers are already dropping, the cable industry is seeing the first signs of decline as subscribers grow more reluctant to take-on additional premium services.
Second, there are 80 million Internet subscribers and 70 million of them are broadband. Moreover, the growth has been far more vigorous than that of the CATV industry. Thus, consumers are obviously looking for something new in media. Surveys conclude that they would cut CATV service before cutting Internet service.
As for the types of advertising that will compensate copyright holders in the era of a video-centric Internet, please note that we just released a new 71-page research report entitled Future Developments in Video Advertising that addresses the very issue. (Newspaper executives might want to buy it too.) Not only does it provide statistics and analytical commentary, but as a multimedia document it links of videos and animations that demonstrate what the future of video ads will be.
Finally, Steve, I am curious to know if you have ever experienced unlimited high-speed Internet access at your TV that can be controlled conveniently 15 – 20 feet distant from the TV screen. Your reaction is typical of the uninitiated with an economic interest in the established order.
Just to be clear, I have no economic interest in the established order. Like you, I’m an observer.
To compare cable to newspapers is ludicrous, Phil. Newspapers gave away their content on the Net, lost their classified business, and about the only innovation they’ve come up with as their business has declined is to trim the size of their product.
Cable, on the other hand, has been the source of many innovations, like the cable modem service you use, Phil. And they will continue to innovate.
Steve you were the one to imply that a business with 100 million subscribers would not lose customers to the Internet. I merely pointed-out that the 50 million newspaper subscribers certainly does not imply that the newspaper industry can avoid losing customers to the Internet. But if you don’t like the newspaper comparison, then pick other media industries such as record labels, magazines, broadcast radio, or local network TV affiliates.
It is obvious that the Internet is draining customers from all of them. Video is the last to be impacted because it requires the most bandwidth. That is what prompted our February ’09 research report entitled Third Generation Television.
The Internet is a truly revolutionary media force. It is probably a more significant innovation than the printing press. Normally, an observer who merely describes the environment accurately is labeled a realist, but in revolutionary times he is a called a heretic…or, “cable basher” to use Steve terminology.
As for Steve’s claim of having no economic ties to the established order, it should be noted that he is the CEO of The Cable Channel which since 1987 has been “recognized as the leading source for video coverage of and for the cable TV industry.”
Well, today’s media post has an article that says Canoe has “very publicly failed” though that addressable TV is going to take off in the next couple years.
Does the blog author have any insight whether the reasons for failure were the ones that you stated here? I couldn’t quite google anything.
Thank you
Akin