Targeted ads, more choices in US TV's future

The business model of the American TV industry will change dramatically in the coming years, a Verizon executive says

American company Verizon Communications wants to give customers of its FiOS TV service a choice of how to buy and view video, while the carrier focuses on how to keep that customer watching the screen and using information about them to sell targeted advertising.

Those insights came from a presentation at the Connections digital entertainment conference on Wednesday, where Joseph Ambeault, Verizon's director of product development and management for video services, gave a glimpse into how his company views FiOS TV from a business perspective.

"We have an opportunity to change television for good," Ambeault said. The medium has to evolve from the business model of the past 50 years, based on advertising connected to particular shows, to one where advertisers can target specific audiences rather than shows and consumers can choose how to watch.

FiOS TV is the video product delivered on Verizon's all-fiber, high-speed broadband service. After FiOS was launched in 2003 with voice and data, Verizon added video in 2005. FiOS TV's subscriber base doubled in 2008 to 1.9 million. The service delivers traditional real-time TV as an analog signal over the fiber network, while video on demand and other interactive features travel as IP (Internet Protocol) packets, a structure Verizon plans to keep for the foreseeable future, he said.

Though the service is still evolving, the carrier's ultimate goal is to give consumers a choice on each piece of programming they want to watch: see it with ads, pay for it through a subscription or buy it a la carte. There would also be options for viewing that content on a laptop or mobile phone. But that will require a change in the long-standing model for content rights, Ambeault added. Shows and movies have traditionally been licensed for particular networks or types of devices, but Verizon wants consumers to be able to license them per household for viewing on many devices.

"It's all about giving the consumer the control," Ambeault said.

Naturally, Verizon isn't providing this choice just to aid the consumer. It also wants to sell a broader range of content and keep the consumer focused on the screen where those purchases take place. To that end, Verizon has integrated additional elements into the TV experience. For example, customers can now keep track of their fantasy sports teams and compare results with their friends on the TV rather than having to open up a laptop, Ambeault said. There is also a feature that displays ongoing TV programming in a corner of the screen so the viewer can keep tabs on a show while playing a casual game on the rest of the screen.

Amid these changes, TV will still be able to attract advertising dollars, but only through systems that can reach demographic groups with proven interests rather than making advertisers sponsor a show and just hope it's reaching a particular kind of audience, he said. Advertising better targeted to a viewer's proven interests would help TV draw some of the billions now being spent on direct mail, Ambeault said.

This will require a delicate approach to collecting customer information and using it to improve advertising plans, he said. Consumers are used to information about their Web behavior being collected and used, but their expectations are different when they're watching TV, according to Ambeault said. Regulations need to change, but Verizon will be careful about how it moves into this area, he said.

"We spend less of our time worrying about terms of service and regulations around privacy, and much more focused on that stricter court of public opinion," Ambeault said. "You should not expect to read about something nefarious that we're doing ... after we've done it. We'll be very public and out there with our customers."

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