There are a couple of major trends in TV consumption at the moment and they seem almost diametrically opposed, with dual screening leading to an increase in the popularity of programmed 'event TV' that can be discussed with fellow fans online and in real time, and technology that allows viewers to watch content on their own terms. TVNZ is tapping into the former with shows like NZ's Got Talent and its new branded content initiative, and, as TVNZ's general manager of digital media Tom Cotter says, the latter is being taken care of with some big changes to its Ondemand platform, including a Samsung Smart TV solution and the region's first ever iOS and Samsung apps.
Cotter says the work was started about 18 months ago as a result of the speedy advances in mobile uptake ("It’s not an understatement to use the term phenomenon") and consumer research that was conducted to find out what the hindrances to using Ondemand were.
That research showed three major issues: a concern around the quality of streaming, data caps, and screen preference. So it set about trying to remedy those things.
"The genuine intention for us is to change the perception of what a broadcaster is from free-to-air to free-to-screen and making sure there’s that choice there," he says.
Cotter says it went hell for leather on improving quality. It was "the core of everything we wanted to do", so it completely ripped out the back end of Ondemand, which was built in 2006, launched in 2007 and led to TVNZ being seen "as the innovator in the region".
It selected Brightcove, a Boston-based video platform that Forrester called the best in the world, and a content distribution network called Akamai, and the new version was launched in November last year.
"It’s based on a solution that’s the first of its kind in the world. And TVNZ is its first client," he says, which some might see as a rare example of the myth of New Zealand being used a test market coming to fruition.
"We were working with the two best in their field and immediately out of the gate we could tell this was making a big difference. Our error rates dropped from ten percent at peak, where it was buffering or close to buffering, down to less than one percent. Global best practice from what we know is about two percent so we were really happy with the way it was performing and that quarter after we launched we had a 49 percent year on year lift in streams."
He admits that's partially due to the fact that New Zealanders are becoming increasingly comfortable using Ondemand, so the numbers are going up anyway. But due to the changes, he says the loyalty, a measure of how often those browsers came back, also increased by 50 percent because "they knew it was going to work".
The next issue to deal with was bandwidth. So it went out and communicated to all the viewers to say "watch Shortland St on Ondemand, and if you’ve got a 5GB pack, it only uses one percent of your data." It did have a zero rate deal with Orcon, where content streamed through Ondemand didn't count against data allowances. But it doesn't have any of those deals any more, he says. And, in a way, that's because the problem has solved itself, with Telecom's base pack going from 5GB to 30GB (in Australia, he says Optus has gone even further from 20GB to 120GB).
He says that means you can watch in full quality without any concerns. And if for some reason you are concerned, users are able to make a conscious decision about how much they use by choosing different quality (for the Smart TV app, he says it did quite a bit of work around getting a picture that's close enough to a broadcast quality without using up too much bandwidth).
Issue three was screen preference, and if you don’t have a laptop, he admits it’s not the greatest experience sitting in the study (two thirds of Ondemand users in the research said they didn't like watching TV on a desktop).
"We wanted to continue the leadership. We were the first in Australasia to have Ondemand in 2007, in 2010 we were the first commercial broadcaster in the world on PS3, and before the end of the year we’ll be the first New Zealand commercial broadcaster on Samsung Smart TVs, and the first commercial broadcaster in Australasia to have our full catalogue of local and international shows across smartphones and tablets."
Depending on what research you look at, between 44 and 50 percent of New Zealanders now have smartphones. And ten percent have the intention of buying one in the next six months, he says. As for tablets, ownership is about ten percent at present, but because they are a more communal product, the actual usage of them is a lot higher, with intention to purchase set to increase by about 200 percent next year.
"So they're two viable platforms from a scale perspective, particularly with this generation of devices, but also because of the propensity to consume video on them. They’re very intimate and engrossing devices," he says, something he gets to see first hand during his bus rides to and from work.
The Smart TV app will be live before the end of the year, while the iOS app launches in February and the Samsung app a few months after that (the mobile app hasn't been made for all Android handsets because it’s quite fragmented but these two platforms have "most of the market cooked"). And all of these new innovations have been designed with the 'use case' in mind, he says.
"What is the mindset of customer and what are we doing to solve their problem? The predominant use case for Ondemand is ‘I missed a show’." So to cater to that in the home streams there's a big emphasis on the shows that create 80 percent of Ondemand’s streams.
From a commercial perspective, some sacrifices have had to be made to make way for this new technology, with the likes of Ad Selector not playing a role—yet.
"It’s actually a really complex technology solution. The ecosystem of technology around HTML5 is still quite nascent so these things are still evolving. Flash has been around for about ten years and there are a whole heap of components already there. Ad Selector is on the roadmap. But what you lose there you gain in being with users everywhere. At the moment, you gain higher socio-economic households; those who have these devices. And our advertisers and our consumers have been screaming out for this."
And as it's a world-first from "a big player in a small ecosystem" working with two of the world's pre-eminent technology and content providers, there are definitely plenty of people watching how it all pans out, he says.
"It may not be the model for the huge broadcasters because they have the scale and the budgets to be able to do it inhouse. But it just makes a whole heap of commercial sense to outsource the platform. It’s what you do with broadcasting, so it’s what we’ve done with this. It’s done at a fraction of the cost of building it yourself and you get to market quicker."
In essence, he says these developments are all about enhancing the experience for the user. And while there are certainly not as many ads in an Ondemand slot as there are at 6.10pm, he says the ad revenue is relative to the proportion of the audience.
"Broadly speaking, around the world Ondemand viewing makes up about one to two percent of total viewing. And so therefore it's garnering the same percentage of the advertising pool. So it’s only a small amount of money, but its proportional. And it’s critical we get it right ... The value the advertiser [ANZ is set to be the major sponsor of the mobile and tablet apps] is getting is a one on one. You’re definitely connected to the screen, you’ve made an active choice to watch that content so your level of engagement is much higher. And you’re also able to respond to a call to action."
According to OMD's Anthony Gardiner, Ondemand is the future.
"And once they work out they can offer a logged in state (possibly using Facebook authorisation) for premium content, they will be able to charge more as the ads will be much better targeted," he says.
However, he says it remains to be seen if this future state will see TVNZ battling YouTube, which, along with Netflix, has put plenty of cash into creating its own premium content, for the rights to play anything because "the global providers will want global rights" (paid-for streaming service Quickflix, which appears to be in a bit of strife at the moment, has been hampered by its lack of/old-school content, something it claims is due to the exclusive content deals in this market).
"If that is the case," says Gardiner, "the future for TVNZ etc will only involve locally produced content, and possibly driving around deserts on piecemeal motorbikes with Mohawks looking for oil. As for now, pre-rolls are a pain in the ass."
Cotter says Netflix has had really mixed results with the creation of its own content. And says the art of making content that’s desirable is not as easy as people think.
"When it comes to rights we’ve got really strong partnerships with our rights holders and content owners," he says. "... It’s quite a lot harder for us to go the way of the newspaper. Quality content still costs a hell of a lot of money to create. So you do require the mass audience to make that happen. We’ve got people talking about going direct to the customer from the production company, but they forget they’ve got to get the people there to watch it. And at the moment I would estimate there’s probably $1 billion worth of content on Ondemand. So you need something that’s better than Revolution, or Cougar Town or Shortland St."
TV networks have never had so much competition. In the past, all they had to do was be better than what was on the other channels at the same time. The internet stopped that. But even so, TV viewership has never been higher and Cotter thinks the confluence of those two trends mentioned above—dual screening and Ondemand technology—means it's an exciting time for the industry.
"Inherently we come home and we’re a bit knackered and sometimes it's quite nice to turn on a broadcast TV channel. Sometimes I want to be passive and sometimes I want to be active. For dual screening, or companion TV, or whatever you want to call it, the biggest components of that are these amazing applications out there called Facebook and Twitter. We’re experimenting with certain aspects of that. But in 2012, people want video everywhere, all the time and they want it in perfect quality."
They also want it quickly, which, in an increasingly globalised world, also means fans can—and will—get those shows illegally before the surprise is ruined on Twitter by someone watching in the US. This is one reason MediaWorks created its Fast Four sub-brand to screen shows the same week as they screened in the States. But from TVNZ's perspective, it's all about having the best content and, as Cotter says, "being the best free-to-screen option in the market".