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Multichannel News yesterday reported that Canoe Ventures would shut down its interactive TV (iTV) development, and move forward with only a VOD delivery focus. In our recent Advanced Advertising report, we highlighted that iTV had a modest (3-5% of ad sales) revenue potential. Unlocking that potential is seen as being dependent on two key factors, first, building a unified platform with large household addressability, and second, ensuring interactivity is not seen as intrusive and interrupting the programming experiment. In the same report, we discussed viewer consumption shifting to a variety of on-demand platforms. Five years from now, we expect VOD advertising platforms will be required for broadcasters and MVPD’s (MSOs, IPTV vendors and satellite vendors) to maintain their advertising market share. Absent these technologies, we forecast a 15-30% drop in advertising market share to television platforms.

The surprising decision by the six major MSO’s that had invested in Canoe (Comcast, Time Warner Cable, Cox, Charter, Cablevision and Bright House Networks) to shutter most of Canoe was likely driven by several factors, including:
Limited success in trials of the technologies, or data that viewers showed rapid iTV fatigue.
Difficult technical challenges to use EBIF for interactive advertising across multiple networks due to divergent middleware standards.
Recognition that the best TV commerce platforms will likely be born out of second screen, or companion applications – rather than fulfillment occurring on the main screen.
With Canoe’s exit from this market, we are likely to see operators leverage their own interactive TV (iTV) platforms for delivery of their own tune-in ads, and some local advertisements. A few networks may maintain interactive programming – notably those like Home Shopping Network where it is core to their value proposition – performing MSO integration themselves.
The VOD space, further, seems a little bit more crowded. Both Blackarrow (with its well established AAMP consortium) and This Technology are already well underway in this market. Blackarrow hits primarily the Comcast VOD footprint, while This Technology has not been able to disclose where its decisions are taking hold (we hope to update this after speaking with them further). In both cases, it is possible that Canoe will operate the pipes that deliver many advertising campaigns to market.Thisbusinesswill likely grow to a low-margin, high transaction volume business over time.

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