In September 1999, David Verklin, now CEO, Aegis Media Americas, spoke at the JackMyers Forum on Interactive TV Development in New York. More than 600 people attended. Following is the transcription of Verklin's speech, which in many ways is even more timely and relevant today than it was when he offered a vision of the future of Interactive TV from the vantage point of 1999.
Jack Myers: David Verklin recently moved to New York from San Francisco; he left Silicon Valley, and came to New York, going on a kind of opposite migration, just a few months ago to head Carat North America. Carat, as many of you know, is the European media buying organization headquartered in London, that is one of the largest, if not the largest, global media buying planning specialist. And David’s been very outspoken about a number of issues. David will be setting the table for us from the advertiser and agency perspective. David Verklin.
David Verklin: Hello everyone, thank you so much for coming today, Carat is proud to be a participant in today’s forum, and I am really honoured to address a group as influential and as auspicious as this one. I came here today, not as an expert, but as a student. I came here today to represent a company that’s committed to participating in the evolution worldwide of Interactive Television. Our clients, over 4,000 clients worldwide, are committed to contributing and helping make the next evolution of television interesting and useful to the consumer, but they also want to make sure that it is impactful, and relevant for their business and hopefully flexible and straight forward, for companies like mine, and for many of yours, that plan and buy advertising schedules.
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So, what are the issues of interactive television for companies like ours? What are we talking about on a media planning and buying side? I know my time is limited today, so I will be very brief, and I know Tom Brokaw is coming, he's much more handsome and much more interesting than I am. So, here are a few of the things we are thinking about, talking about and discussing with our clients around the world, in regards to Interactive Television. The first is the recognition that when we talk about and contemplate Interactive TV, we are talking about moving from a chair based medium, the Internet, to a sofa based level of interactivity: from lean forward to lean backward interaction. You know what I mean in this room. The Internet today is fundamentally a chair based media system from the perspective of the most important part of the Internet: the end user. He or she is interacting with a PC, on a worldwide basis, approximately to what is 19.5 inches away from this delivery system, from the screen. The Internet is fundamentally a text based, static media delivery system, and is structured in pages.
Think about interactive television and how that radically changes the dynamic. We move from lean forward media, hunching over a keyboard, to lean back media. From chair based to sofa based consumption. The ergonomic implications are important in our opinion. Some of the lessons we’ve learned by participating in test beds, and some of the things that I am sure you’re thinking about, are as follows: the navigational controls in interactive television must be seamless and allow for flexible movement. Our studies of test beds around the world are saying simply put: lots of times, folks don’t want to talk to their television set. They just want to be Tele-passive versus Tele-active.
The editorial and advertising content that streams in to Interactive TV households is viewed from an average distance around the world of about 9.5 feet. You can’t put the same stuff on TV that you put on a screen that you are viewing from 19.5 inches away. The point is we think that the TV and the PC will bifurcate into two different content structures, as convergence becomes more robust. And finally, the consumer around the world is saying, it’s got to be useful. It's got to be useful!
Developers around the world are enamoured, and they should be, with what’s possible with Interactive TV. But you know what the consumers are saying around the world? They are more enamoured with what’s useful, what’s relevant, what’s desirable and what they frequently use the most. Advertisers and media companies like ours, add to the list that they are interested in what’s economical and what’s most easily deliverable. Around the world, our studies are showing that we are hearing the same things. Around the world from Boston to Belgium, we’re hearing that the TV set that’s viewed most often, is the one that’s in the kitchen, or adjacent to the kitchen. From Nice to Nantucket, we're hearing that the remote control, or the infrared keyboard, seems to be tucked under the sofa cushion and hard to find. From Tokyo to Tallahassee, we're hearing that the kids in the family, where there’s a kid present, control what’s on television, including what's on interactive television. And from Stuttgart to San Francisco, parents and kids seem to be eating, more than they’d like, standing up. Parents and kids seem to be eating standing up! They are eating standing up with a TV on, or a TV nearby. This is certainly the case in many households, and certainly in my household I wouldn’t argue with that. And I wouldn't be surprised if you guys feel the same way if you have kids. Now, my wife and I seem to believe we have raised some fairly well mannered kids, if only we could get them to eat and to be sitting in a prone position! The point here is that we must integrate full motion interactivity into people’s everyday lives. It’s got to fit into the everyday life around the world. The migration of the Internet into our living rooms is not the promise of interactive television and the tests beds and the developers that you are going to see here today, have already begun to prove that. Said another way, around the world we've learned that a slice of pizza easily blocks an Internet infra-red keyboard.
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The second issue, and the one that many ad agencies are concerned about, is about the one department in the typical ad agency in this city, and around the world, that's unprepared and to some degree terrified of the Interactive TV revolution. How many people in this room have ever worked in the broadcast production department of a typical ad agency? Well ladies and gentlemen, then you have never seen sheer terror. The issue is simply this: the whole enchilada of the American advertising business, the entire business model is based on the four principles of television advertising. Principle number one is that television moves America. It’s the big show. It’s the core of the advertising business, television advertising builds brands, it moves merchandise and it makes reputations. Principle number two, the business model says create a few great ads for a client and run the living daylights out of em’. Principle three, as long as the Internet’s content is text-based, it is more like creating print advertising from the agency perspective. From that perspective it’s more like creating print. However, when advertising moves from an agency perspective, on to that sofa based delivery system, on to the television set, it enters the bread and butter of the American advertising industry. And principle four, on average, according to the American Association of Advertising Agencies the average 30 second TV commercial in this country costs over $300,000 to produce. Over $300,000 to produce and that is for just one 30 second TV spot. An agency will shoot 19,000 feet of film to produce an American television commercial. It will take two to four weeks to edit, and each scene in the TV commercial is shot from anywhere from 30 to 50 takes. It probably takes (for) an average TV commercial, big level A production, 13 weeks from start to finish. Now, I helped start an ad agency and I have run one for the last five years. And some people would say that the company I worked for was pretty good, but I could tell you including from my former ad agency, you can get TV commercials on three dimensions, fast, cheap and good. But I will tell you for those of you that are clients in the room you are rarely ever going to get more than two of those simultaneously. You can have your advertising fast and cheap, but I will guarantee you, it will rarely be good. And if you want it good and fast, it will rarely be cheap. I know, I helped do it!
So what's most important is that the industry, the American advertising industry, is structurally unprepared for an age where Interactive TV commercials go on the air, or certainly get adjusted in a matter of days. Gracious, could it even be hours? Where are we going to find a way to produce full motion video content in-house and edited in-house with one week lead times? One prediction from David Verklin: I believe that the first casualty of Interactive television, is going to be the Shutters Hotel in Santa Monica, California, where I sent more creative guys than anyone else. And I am telling you they are in trouble with the advent of Interactive Television!
Said another way, how are we going to get a $30,000 TV spot done in America, in the future. Not $300,000, but $30,000. I can tell you this, ladies and gentlemen, you couldn't get a $30,000 high quality TV commercial out of most ad agencies in America today, with a shotgun, a whip, a pistol and a cattle prod. What we need to do from an American advertising agency perspective is that we need to reinvent and really re-look at our broadcast production capability and our broadcast production departments. It's the one part of this conference, I think, that should be represented; we are not talking about how do we develop and produce full motion Interactive TV content. Creatively, it is not that hard to spec it out, but getting it on film economically, reliably, quickly and most of all, with interest and impact, is quite difficult.
Another question is, think about how much larger a roll broadcast production will have in creating advertising content. We need to get agency broadcast production people involved in the next conference. This is an area of interactive television that we need to discuss a lot more.
Third, do we have any representatives here today from product placement companies? You know the companies that get clients' products used or integrated, on to TV shows or movies. One company has been started and our research is indicating that they may be very, very important at the next conference because they could be the key players in much of the next and early rounds of Interactive television. Don't ever forget the idea of a sitcom set that uses clickable, real, in-situ product placement. Don't ever think, or forget, about Martha Stewart Living and having your clients' china or your linens, integrated in her TV show. Let's never forget that the show is the commercial, stupid. The show is the commercial, stupid! We need to go back and really re-look at some of the lessons learned from the Golden days of television.
Fourth, and finally, companies like ours, of course, think about how we are going to make money in interactive television? How will Interactive TV affect the business model of the buying and selling of television air time? Our research indicates this is going to be fantastic, for most of us who are students of the business and want to participate. Why? First of all, Interactive TV, by definition will raise media planning to a function equal to, and if I am right about product placement, in some cases, as a substitute for classic creative production. Media and creative will certainly become more equal partners in the industry revolution. Our studies are indicating that from a media sellers perspective, and I know many of you here represent media outlets from the sales community, our research is indicating that the selling models will have some component of the cost per air time, like now, but also incremental revenue if the media deliver sales leads and interaction: two revenue streams, two ways to make money. And then finally, from the buying perspective, the model that we see is the model that will have greater levels of media accountability. We will know if something is working, we will know if something is underperforming.
We will get to a more idea oriented and creative approach to media planning advertising. Ideas will become more important again. Why? Because clients around the world are saying that if it is working, the cost is secondary. If it is working, the difference between an $11 CPM and a $10 CPM is irrelevant. That's what clients are saying.
So, in summary, what's the score card that we see for the future of Interactive TV from the view of many of many of the publics that we will be involved? If you are a direct marketer and you look at the future of Interactive TV, from your view Interactive TV is challenging. Full motion video is not increasing response rates at that level greater than the classic Internet delivery system. In some cases, as of today from the direct marketing perspective, the Internet looks like a better delivery system.
Now if you are a research guy, like Jack Myers, and you look at the future and you are thinking about what's Interactive TV going to be like, the future looks, lucrative: lots more conferences. If you are an agency media guy, and you are looking at the future of Interactive TV, the future looks like doable, if we hustle. Fundamentally, we've got the right tools in place and we've got the right relationships in place. But we are going to need to hustle and get organized and change the quality of our staff and upgrade our talent pool ASAP. If you are an agency creative guy, and you are looking at the future of Interactive TV, the future looks like a lot of hard work, lots more ads, some of them complicated, you are probably going to have to put aside that screenplay for the time being. If you are a network, a broadcast network or cable TV sales person, the future looks great. Bring it on baby! Because you are now going to be able to sell Tele passive, as well as Tele active, the future looks pretty terrific. If you are the typical viewer, in our opinion, and you're looking at the future of Interactive TV, the future looks schizophrenic. Passive TV still looks pretty much the same, but I love that Interactive TV, because bye bye to those TV ads. When we move to integrated TV content though, I am very anxious to know how do I get my television to shut up? If you are an agency production guy, and you're looking at the future of interactive television, the future looks, head for the hills! You want that many ads, that fast, for that price? When did this place turn into a Burger King? And finally, if you're on air talent, like the speaker that is following me, the interactive future looks intriguing. I am working more, I am producing more and the medium is more flexible. I may need to talk to my agent however.
Anyway, ladies and gentlemen, thanks so much for listening, thanks so much for coming, thanks so much for allowing Carat to be part of it, and I close with saying: Bring on the revolution. Thank you very, very much.