Hendin+C+Final+Report

Hendin C

Proximity Research Report

= = = = =**Advertising in the Post Commercial Era**=

How to Reach a Generation Which Proactively Snubs Commercial Advertisements
By Clark Hendin 10 May 2010

Table of Contents

 * Execu****t****i****ve Summary**


 * WebTV: Fancast and Hulu Provide Online Television**


 * Netflix Flexes Its Muscles, Blockbuster Buckle**


 * Focus Group Results**


 * Why Netflix?**


 * What Gen-Y Really Wants**


 * How to Reach Gen Y**


 * Conclusion**


 * Execu****t****i****ve Summary**

Throughout its history, companies have used television as a vehicle to promote their products. The main form of advertising has been the television commercial. Commercials have always been a minor, but unavoidable nuisance when viewing a television program. Since the invention of the remote control, many people have developed the habit of switching channels during commercial breaks. However, commercials remained inescapable.

Now, a new generation is able to view television programming nearly commercial free. Generation Y has taken advantage of providers of interruption free video content. Whether they view their content from web-based sources, cable on-demand libraries, or content downloaded straight to their television, Gen Y has many options to avoid being bombarded with advertisements. Companies are finding it harder to advertise to Gen Y. Throughout this report, I will outline the specific problems companies face, and provide direct solutions.


 * WebTV: Fancast and Hulu Provide Online Television**

Comcast, one of the leading cable television providers in the United States, provides a unique service to its customers. Customers who do not have access to their home television can still watch the same content they would be able to at home. Comcast subscribers can log onto Fancast.com and watch any TV show or movie available through their particular package. Often, the library of programming available in Fancast is much more comprehensive than the television on-demand library available through the customer’s television. In addition, many programs and movies are provided in a commercial free format. Even non Comcast customers still have access to many shows and movies for free.

Hulu.com provides similar access to TV shows and movies. While registration is required to view certain material deemed too mature for most audiences, there are no membership requirements for access to the entire library. Television shows and movies on Hulu.com are provided with limited commercial interruption. While the normal commercial break on broadcast television may include at least five commercials, typical commercial breaks on Hulu include only one commercial which lasts about thirty seconds.

These WebTV providers are ideal for broadcast television enthusiasts, but fail to completely satisfy the typical Gen Y movie buff. Hulu.com’s movie library is very limited, and while Comcast customers have a much larger movie library at their disposal on Fancast.com, many Gen Y members subscribe non web-based services like Netflix which boast a much larger movie library.


 * Netflix Flexes Its Muscles, Blockbuster Buckles**

Through our research, we have discovered that Gen Y takes proactive measures to avoid commercials while watching movies as well as television shows. Many Gen Y members subscribe to premium channels such as HBO or Showtime. These channels broadcast movies commercial free and provide an on-demand library. Unfortunately, these libraries remain limited in selection. If someone has a particular movie in mind, they would feel lucky to find it available through on-demand or Web-TV.

In the past, people relied on video rental stores such as Blockbuster or Hollywood video. Sometimes you would travel to the store and the movie you wanted would still be unavailable. Today, many Gen Y members no longer travel to video rental stores. Instead, they subscribe to Netflix.

Netflix allows subscribers to pay a monthly fee, and rent DVDs which are received in the mail. Users can rent as many DVDs as they choose. Netflix's basic package comes with an $8.99 monthly fee; an amount that would only allow you to rent two DVDs from Blockbuster. Depending on which plan users subscribe to, they can rent out as many as 8 DVDs at a time. In addition, users with an internet connected Netflix Ready Device, such as an XBOX 360, can download certain movies and television shows to their television similar to the On Demand service provided by the aforementioned cable companies. These customers can also access the same library through their internet connected laptop.

Netflix provides a buffet style approach to DVD rentals which is desirable to Gen Y. There are many Gen Y members who subscribe to Netflix in addition to subscribing to premium cable channels. Currently, Netflix's instant streaming movie library is comparable to that of Comcast's on-demand plus Fancast's library. However, Netflix is currently in the process of improving its instant streaming library to be comparable to its selection of DVDs.

"Netflix's Instant Streaming will become more ubiquitous than it already is. In fact, the company doesn't see its chief competition coming from Redbox (Nasdaq: [|CSTR]), Amazon (Nasdaq: [|AMZN]), or Blockbuster, but from the advances in on-demand services from cable (Schuster)." I believe that as Netflix improves its selection of streaming titles, its format will be more desirable for Gen Y.

In our focus groups, many participants were already members of Netflix. Of the participants who did not subscribe to Netflix, many proposed that they would subscribe in the future if the could steam any movie from its DVD selection. Imagine paying a flat monthly fee, and being able to stream any high-definition movie straight to your HD television. This prospect is extremely desirable, especially among Gen Y.


 * Focus Group Results**

Premium video content is increasingly being delivered through the Internet, giving Gen-Y many different ways to access TV shows and movies. As a result broadcast TV audiences are being fragmented and the movie industry can no longer assume that box office revenues alone will pay for the production of new movies. The rationale for our focus group sessions was to determine how Gen Y currently watches premium video and which broadband technologies they prefer. This information will allowed us to advise Proximity clients on how best to target Gen Y using ads associated with premium content.

__Overall Findings__


 * Gen Y will only spend money to buy certain "highly enjoyable" DVDs.
 * High Definition programming is a preference but not priority.
 * Gen Y prefer to have a service that provides the flat rate pricing and movie selection of Netflix with the convenience of On-Demand;
 * Gen Y does take various actions to avoid watching commercials
 * Gen Y uses a variety of sources to watch broadcast televisions

Essentially, Gen Y wants instant, uninterrupted, and unrestricted access to any TV show or movie. Once Netflix improves its streaming library, Gen Y will get its wish.


 * Why Netflix?**

As stated above, Gen Y wants to enjoy the flat race pricing and selction provided by Neflix with the convenience of on-demand and WebTV. A more extensive streaming library will draw Gen Y subscribers like ants to a picnic. "With reduced competition from **Blockbuster** (NYSE: [|BBI]), which closed 567 net U.S. stores last year, Netflix's physical DVD business should continue to expand. Online streaming is becoming mainstream; 48% of Netflix's 12.3 million subscribers streamed at least 15 minutes of video last quarter."

Netflix has demonstrated a strong desire to expand its streaming library as evidenced with its recent agreement for physical and digital distribution of Fox movies and television programs. "The streaming agreement with Fox includes instant availability of all prior seasons of 'Lie to Me,' 'Bones,' "24,' and 'King of the Hill,' as well as complete seasons of 'Prison Break,' 'Arrested Development' and 'Buffy the Vampire Slayer.' The deal also includes contemporary films like 'Aliens,' 'The Thin Red Line,' 'Romancing the Stone' and 'Patton (Silicon Valley / San Jose Business Journal).'"

Furthermore, Netflix makes its services available through devices already popular with Gen Y. The simple fact alone that Netflix users who also own a Wii, XBox, or PS3 (popular devices among Gen Y gamers), is an indication that Netflix's popularity among Gen Y will continue to grow. In addition, Netflix intends to provide an iPhone app. "iPhone owners could watch movies and television shows instantly, without advertisements. Movies would take less than 30 seconds to load, and there would be no additional fee beyond a regular Netflix subscription (Newman 2010)


 * What Gen-Y Really Wants**

Gen Y is not easily satisfied. Through our focus groups and research, he have concluded that Gen Y wants commercial free, streaming a la carte, high definition movies for a low monthly rate. We have also discovered that many Gen Y members are illegally streaming movies for free on their computer. Some download the movies and burn them to a DVD. When it comes to watching movies, Gen Y wants them cheap (or for free), fast, high quality and they desire unimpeded access to an unlimited library. In other words, Gen Y has become allergic to the commercial break.


 * How to Reach Gen Y**

Even though Gen Y avoids commercials like the plague, it is still possible to pique their interest through other forms of advertising. Companies looking to promote their product or service to Gen Y simply need to return to the basics. If a movie has no commercials, then put the commercial in the movie.

Product placement by no means a novel concept. One would be hard pressed to watch any summer action blockbuster and never see a closeup of insignia one the protagonist's sleek sports car or rugged SUV. In addition, when a main character is knocking back a cold brew or a name brand soda, their hand never obscures the label which is conveniently facing the camera.

In addition to product placement, product association can also be an effective tool to reach Gen Y. It is impossible to avoid walking into a 7-11 convenient store without noticing a huge banner or prominent cardboard display promoting a special food or beverage deal in association with the season's current popular superhero movie. Whether it's soda fountain cups revealing a mini movie poster, or rebates on movie tickets with purchase of a select item, these products become popular by association with a popular movie.


 * Conclusion**

Advertising to Gen Y may be tricky. With so many other forms of entertainment, Gen Y is much less likely to take in video entertainment if they have to suffer through commercial breaks. Like giving a dog medication by sticking the pill in a piece of cheese, companies need to trick Gen Y into thinking they are not watching an ad. Gen Y will be satisfied as long they are not involved with an activity not suitable for someone with a short attention span.

Generation Y is one which grew up in the age of video games, the internet, and CGI movies. Their attention is easily grasped, but also easily lost. By placing ads within the movies or associating a product with a movie, Gen Y can be advertised to without breaking their concentration.


 * References**

"Netflix, Fox Expand Deal for Streaming Content - Silicon Valley / San Jose Business Journal." //Business News | Bizjournals//. Silicon Valley / San Jose Business Journal, 09 Apr. 2010. Web. .

Newman, Jared. "Netflix on the IPhone: It's Time." //PCWorld// 02 Mar. 2010. Web. 03 May 2010. .

Schuster, Mike. "How Netflix Succeeded Where Blockbuster Failed | Markets | Minyanville.com." //Ticker Talk//. 22 Apr. 2010. Web. .