John Drinnan: On-demand services boosted

TVNZ's Filthy Rich has been on offer on its OnDemand service.

An earlier version of today’s Media column contained several inaccuracies regarding SKY TV. It referred to new content on Sky’s Sky Go service. That was incorrect. Sky is adding content to its On Demand service, for Sky customers with an internet-connected box. The column also incorrectly referred to an error where customers erased shows they had watched. This is not an issue.

MediaWorks is taking initiatives to improve its on-demand offering on 3Now. Under its past ownership, MediaWorks made slow progress in this area, thanks to the company's debt problems.

Chief executive Mark Weldon has been intent on an online upgrade. No doubt he will see that as helping to attract an investor to buy the radio and TV company from its owner, Los Angeles-based vulture capital fund Oaktree Capital.

Weldon has backed initiatives to develop the digital arm, but could not be reached for comment at print time.

Competitor TVNZ has been investing extensively in its own on-demand offering since 2007, when it was among the world's first broadcasters to do so.

TVNZ OnDemand gives the free-to-air sector a bigger foothold in a world where more and more people - especially young people - get their entertainment from the internet.

YouTube is a big competitor, particularly for those young viewers.

The question is - as it is for everything linked to the free internet - can broadcasters find a way to make money out of it?

For now, TVNZ is holding a 60 per cent share of TV ad revenue.

Does it pay?

TVNZ says its OnDemand service is working well.

But the broadcaster is not breaking out exactly what contribution the service makes to its total revenue - though a source thought it unlikely that it has returned its investment so far.

Advertising commentator Martin Gillman believes there will be a crunch point with OnDemand at some point.

In his opinion, TVNZ is charging advertisers too much to appear among the ad-light offering on the OnDemand service.

To reach 1000 people, he says, costs eight times as much as it does to advertise on standard broadcast programmes.

Gillman says advertisers are drawn to OnDemand now, but he believes TVNZ would need to substantially increase advertising levels if the service is to cover its costs.

The commercial director of TVNZ, Jeremy O'Brien, has the best possible response: he says it is a case of supply and demand, and there is plenty of demand.

"We've made a commitment to our viewers that we won't bombard them with too many ads," he says. "We have a lighter ad load and our viewers will only see two ads in a TVNZ OnDemand break."

O'Brien points out that less than 5 per cent of the time spent viewing video in New Zealand is online.

The fact that TVNZ OnDemand viewers see only two ads means more cut-through for the advertisers, he says.

Buried treasure

Sky is looking at ways to make more use of its subscriber database.

An ad industry source says the company has a valuable database of information from 851,000 subscribers.

Until now, it has had viewing information only at a household level.

But with the online capability of the Sky set-top box, it is possible to break that down to information on individual viewers.

Spokeswoman Kirsty Way says details are still being worked out, but Sky hopes to implement the change this year.

It is understood that one option is to develop an individual viewing menu that is also linked to a recommendation engine.