ITV Interview: Channing Dawson, SVP of Emerging Media, Scripps Networks

  Channing Dawson is SVP of emerging media at Scripps Networks, the company behind such channels as HGTV, The Food Network and The DIY Network. A long-time presence on the US interactive TV scene, he was also the recipient of a 2006 [itvt] Award for Leadership in Interactive Television. He recently spoke to [itvt]'s Tracy Swedlow about strategies for making advertising work in on-demand programming, the growing popularity of user-generated content, Scripps Networks' attitude towards single-screen interactive TV, whether the emergence of broadband TV will lead to "disintermediation" of cable and satellite operators, and more.

[itvt]: I understand that you are involved in Scripps Networks' VOD efforts…

Dawson: I'm involved in VOD, but only on a strategic level. One of the interesting lessons that we've learned with VOD is that the waves that started in VOD are right now lapping on the beaches of broadband. After all, on-demand is on-demand: non-linear programming has inherent qualities that are different than linear, and VOD and broadband share some of those same inherent qualities. I'm really intrigued by the realities of on-demand programming: by the difficulties of making business models work in on-demand programming. One serious problem with VOD is the limited advertising inventory in on-demand shows. When a program is offered on-demand, that reduces the inventory to a third, if not a quarter, of what it would be when the show is in a linear context.

[itvt]: Why is that?

Dawson: It's basic and integral to what on-demand programming is. A half-hour show that is running on linear television has as much as eight-and-a-half minutes of advertising and promotion. Take that same show and offer it on-demand: if you have that many ads in an on-demand show, nobody would watch them; they would just fast-forward through them. You have to take into account that people are sitting there with their remote control and can fast-forward through anything they don't want to see. So the first thing we did when we started offering shows on-demand was to reduce the amount of advertising. As a result, we had one advertiser per show--maybe two or three ads, but one advertiser per show. That way, we were able to garner a higher CPM.

[itvt]: Did that strategy work?

Dawson: Well, it worked--and it's still working--inasmuch as we're selling out our inventory. But, on the other hand, there isn't as much inventory. Sure you can put two or three minutes of ads and a promotion into an on-demand half-hour show, but people will just zap them. You have to assume that you can't do more than a 30-second ad--at best--at the beginning of a half-hour show, and in the middle of the second break. People are generally willing to watch a 30-second spot or a promo, but they just don't want to watch two to three minutes of ads.

Now, what we believe could be the solution to this problem of lack of tolerance for advertising in on-demand programming is contextual advertising. We're lucky in that our programming lends itself to this. If we have a program on kitchen design, we can attract advertisers like Sub Zero, Bruce Hardwood Floors, and similar companies to produce content-rich vignettes addressing issues around kitchen design. That's not necessarily the case for most TV shows: yes, you do sometimes get pharmaceutical ads, for example, in medical shows, but a lot of general entertainment shows suffer because they have too great a variety of advertising, none of which has any intrinsic relationship to the content of the show. Packaged goods advertising, for example, shows up in the most unlikely places.

What we've been doing is not only trying to attract more contextual advertising, but also building in the ability to do standalone sponsored content. So, in the context of a kitchen show or a bath show, you have Kohler, for example, with a one-minute program containing eight tips on how to make a small bathroom bigger. What you end up with is actually contextualized content. It's not an ad: it's design tips from one of the great brands in the kitchen and bath space. So our entry into VOD has resulted in us redefining what an ad is.

[itvt]: How to you transition from regular programming into the sponsored content?

Dawson: It dips to black. We tested the whole idea of telescoping--you know, something along the lines of "Stay tuned for some great ideas from Kohler"--but we don't yet have enough research back to say that that's effective. To be honest, we really don't know at this point what the best way is to lead into these contextualized vignettes effectively, but that's all going to be part of the art and science of on-demand programming. As we get better and better at that science, we'll have a better idea of what the flow-through to that kind of content needs to be: of how you have to set it up, and indeed of whether it even needs to be set up.

Now, one thing we do believe is that with regular cable VOD programming, just like with broadband, you need to tell people how long an ad is. You might want to have a counter, just like we do in the pre-roll for our broadband VOD content.

[itvt]: So, while the ad is running, you'll get a bit of timecode at the bottom?

Dawson: Yes. Time is something that people are trying to manage better now. And, because one of the important things about on-demand is that it allows viewers some control over time vis-à-vis television viewing, then we would be well-advised to pay attention to the importance of time in that context. But, as with the whole question of how to lead into sponsored content, we're still learning how to do all this.

[itvt]: I don't know if you've heard of a company called Zype out of the UK, but one thing that they're doing that's interesting is creating entire on-demand channels for advertisers. They just did one for Honda on the HomeChoice IPTV platform. Is that something Scripps would be interested in doing--working with an advertiser to help them develop a channel of their own?

Dawson: All this is very interesting to us. Take Cox's Freezone, for example. In San Diego, Cox set up an on-demand service where advertisers could run long-form vignettes, and they claimed at one point that the service had gotten 25% usage. In general, I think it's easier for Scripps to take the leap into sponsored content because of the genres we're in. In the home and garden field, people are interested in products, so they are much more willing to tolerate contextualized advertising and sponsored content and don't necessarily see it as intrusive. In fact, we have a great show on HGTV, called "I Want That," which is completely devoted to products. Now, that show is editorially driven, not ad-placed, but it does show a desire on the part of our audience for this type of detailed product information. So, while with some kinds of programming advertising takes people away from the entertainment, with our programming that targets people seeking information, ads can become content and sponsors can become purveyors of content. It's relatively easy for us to interlace advertising and content--I imagine that it would also be relatively easy to do that in the context of health-related programming.

[itvt]: Scripps started doing VOD early--as far back as 2001. What other things have you learned from your experience?

Dawson: Yes, we've gone through the pre-adolescence of VOD, and now we're coming into its adolescence. The fact that we own all our own content is one thing that has helped us get ahead in this business. Another thing we've learned with VOD is the importance of having a DRM or asset management system in place. So, by the time we got into the broadband space, we were well down that road and had set up a full asset management system, which is, to be sure, still in its infancy. We've learned a lot about the workflow mechanics of doing VOD--like the databases you need, how to get the content pitched and caught, and so forth. Another thing we've learned about VOD, as I think I mentioned earlier, is that people who are using it always have a remote control in their hands and seem to be much more willing to use it than are people watching linear programming. We've also found that VOD is extremely hard to promote, because it isn't yet available on a national basis: until it gets critical mass, you can't promote it nationally and it's too expensive to promote it separately in all the local markets it's in. So what you end up doing is relying on the cable operators to do your promotion for you. However, they have lots of other things to promote--like their own VOD channels, and other things that pay them money, such as the premium channels' on-demand services: if a Comcast customer, for example, signs up for HBO On Demand, Comcast gets a little piece of that. So, if you're Comcast, who would you rather promote? I have to say, though, that Comcast actually went out of their way to promote our stuff, including us in TV Guide articles and a variety of other things they could. Now, we have tried a lot of ways to promote our VOD offerings on our own, but VOD is just very hard to promote. Until we're distributed nationwide--and we're currently as well-distributed as anybody in on-demand…I believe we're now in over 20 million homes--but until we're in the 70 million other television households, promotional efforts are going to be scattershot: you're just not sure you're getting to the people who actually have VOD. Of course, another thing that prevents people from becoming familiar with your VOD offerings is that VOD user interfaces are kind of clunky. They're hard environments to navigate through. Though one thing that we're looking into now is the whole idea of tying linear television to our on-demand offerings and programming between the two. Our new head of VOD, Doug Hurst, and our VOD manager, Carrie Conyngham, are moving aggressively to time-shift our best primetime programs into VOD. So, if you miss a primetime show, you might be able to find it the next day or so on VOD, and if you want more of the same series, those titles may now be on VOD…to a limited degree.

[itvt]: How popular are your VOD offerings proving?

Dawson: I would say we're in the middle of the pack. We're not doing horribly, but we're not over-the-top either. That's according to rankings we have seen of around 120 VOD services. The most popular VOD offerings are things like the NFL, kids' programming, comedy, movies and music. One of the reasons we're not doing as well as those kinds of offerings is that, as it turns out, 18- to 34-year-old males are the core VOD audience and women don't seem to be going over to VOD as much as men are--and women make up about 70% of our viewership on HGTV. For some reason, women seem to be a lot less tolerant of having to navigate through six screens to get to a particular video than men or kids are. So encouraging women to make more use of VOD is one of the things we're interested in. Part of our motivation for putting our best primetime shows on VOD is to attract more female viewers. We're also aggressively pushing email alerts to our core viewers about our VOD programming.

[itvt]: Are your VOD offerings making money at this stage?

Dawson: At this point, our inventory is sold out, but VOD is still not yet profitable. It's a great brand extension for us and a great way to test new forms of advertising and content. For instance, we're finding that compilations work pretty well.

[itvt]: How do you mean?

Dawson: Well, things like "Top 10 Kitchens of the Year," "10 Favorite Bathrooms" and other "Editor's Choice"-type things. So stuff that is an editorial compilation of highlights from programs that ran on linear TV, combined into one 40-minute on-demand program. People love that sort of thing.

We've also done experiments with content on VOD that haven't worked so well. At one point, for example, we thought people coming to VOD were looking for programs devoted to very specific topics. So, instead of calling our shows by their usual show names, we would call them by "topical" names such as "Small Bath Design" or "Making Over Your Bedroom." It didn't seem to work. It turns out that people wanted the same shows that they saw on linear television: it seems the people who go to VOD aren't so much seeking information as looking to watch shows that they like and that they might have missed. So we're now putting our primetime programming on there and calling it by its regular show titles, because that's what people expect.

[itvt]: How does the audience for your broadband video services compare with that for your cable VOD services?

Dawson: They're basically the same demographic, in that, for the most part, the visitors to our Web site are coming from television. However, they're slightly more affluent and slightly younger.

[itvt]: Which of the two services is proving more popular?

Dawson: I'd say that right now our broadband video offering has more viewership. Our advertising inventory is sold out on both services, though we need to add more inventory to the broadband service.

[itvt]: Are you considering tapping into user-generated content?

Dawson: Yes. I'm studying user-generated content from a social network perspective, but there are two people in the interactive group focusing on how to incorporate user-generated content within our sites. We're really in the alpha phase of user-generated content. Just look at the categories our programming falls into: decorating, gardening, kitchens, baths, remodeling, building, crafts, food and so on. Each of those has a lot of potential for employing user-generated content. It also helps that we've got fairly rabid audiences: we have newsletters that go out to 63 million people a month. We have three for HGTV alone--"HGTV Ideas,", "HGTVDecorating" and "HGTVGardening." We also have a DIY newsletter, a GAC newsletter and a weekly Food Network newsletter. And Fine Living sends out a newsletter, too.

Our user-generated content strategy will probably start off really, really slowly. Last year we did a great project at HGTV called "Bad Baths," where we had people send in pictures of bad bath designs: we had a contest for America's ugliest bathroom and we got inundated with photos and stories.

[itvt]: What kinds of community features are you offering or planning to offer on your Web sites?

Dawson: From the beginning, we've had hosted chats and message boards and forums. We're just now designing the next generation of the social networks that are going to be part and parcel of our overall offering. So we're exploring how you build social media and how to do so around particular genres or topics. For certain, we would start with genres and topics that have already demonstrated their potential for this. If I were to build a social network right now on our sites, it might be around the quilters. They are completely dedicated to and passionate about quilting. Scrapbookers are the same. They love to see one another's work and compete with one another.

In the forum that we've got up for crafts right now, the quilting and needlework topic has some 25,000 posts; holiday crafts has 15,000 posts; and knitting has 6,000 posts. So, to a certain degree, we're already offering social networking features; but we are just starting to take it to the next level, where the audience is actually contributing video content. Currently, they're contributing their ideas, and they're guiding one another all over the place, but we're going to get to the point where it's much more two-way and much more interactive. We're just starting to look at that, and it's a big deal for us. We want to make sure that we do it correctly and that we provide the audience with the right tools.

But there's no reason why we shouldn't be at the forefront of user-generated video--and, in fact, we've done that kind of thing in the past. We did a show, called "DIY People," where we videotaped people who were not professionals, but who were very skilled in particular crafts. Obviously, the next iteration of that will be, "Well, shoot it yourselves, guys, and send us your videos." And we'll set up a system, so that the community can rate their submissions. One of the interesting things about user-generated content is that brands are going to have to accept the fact that their audiences will be contributing content that isn't up to the usual quality and production standards of those brands. Of course, that doesn't mean we shouldn't do it. It just means that there has to be this understanding that the content that consumers generate is not a reflection of the brand, but is a reflection of the consumers or viewers. It's simply a matter of being careful about how you do it, and I think this is a perfectly good genre to do it in. It's clear that we have a very committed audience: we do a "Dream Home Giveaway" sweepstakes every year, and this year we had 54 million entries. So our audience goes over the top--way over the top! And I think, for that reason, that user-generated will be a huge deal for us.

[itvt]: Which services have you been using to manage the delivery of your broadband video?

Dawson: We're using thePlatform to help us distribute content. We're also on MSN and on Comcast.net, and we're using thePlatform for both of them. They're great. They've been very helpful. They helped us launch Living.com and our other video sites.

[itvt]: Now, you've just launched a universal player, correct? Why did you feel you needed that?

Dawson: We had done it outside for the first iteration of our broadband video sites. We initially went to MetaStories to help build out our video players for HGTV and Food Network--those were the first universal video players we had. And we went to Dewey Reid of Eat.TV to build Living.com. But when we started to realize how much video we were going to run through our sites and that the external video search engines were going to need a player on our sites to play back all our videos, it just made sense to build one and to have a central place where we could show videos. So now we have one player that can be adapted to all five sites.

[itvt]: Does it work on both the major PC operating systems?

Dawson: It uses the Windows Media Player in a Flash environment. It's not optimized for Macs but it works OK: the vast majority of people who come to our sites are on PC's and use Windows.

[itvt]: Does the player support MPEG-4?

Dawson: It doesn't yet, but it will. As soon as the standard shifts to MPEG-4, it will. What we're doing right now is we're building channels: Kitchen Design, Bath Design, HGTVPro, and we have smaller channels nesting inside the universal player environment.

[itvt]: How are your advertisers responding to broadband video, compared to VOD?

Dawson: Well, as I said earlier, we've been sold out on VOD for some time now. But the advertisers are trying everything, right? And one thing that they prefer about broadband is its ability to provide metrics.

[itvt]: Now, I don't see Scripps Networks doing any experimentation with single-screen interactive TV. Why is that?

Dawson: That's a good question. Let's go back to December 31st, 1999, on the eve of the new millennium: We're working vigorously with a group of people here and in California doing the planning for the first interactive television show of the new millennium. It was for the Rose Parade, which took place 8:00AM January 1st, 2000. We "interactivated" it, so you could vote on the parade floats and select which ones were your favorites. And so what came of that? Well, we probably had 126 viewers play along with us that day and cast their votes. Now, we didn't mind back then because all of it was experimental and it was wonderful and it was great to do. But then the bottom dropped out of the ITV market: we didn't see any advertisers stepping up, because they couldn't get a big enough footprint to do a big interactive TV event. These same issues have held the industry back for the past five years. Basically, we lost our budgets for doing ITV because 1) there wasn't any passion for it on the part of the viewers, and 2) because the advertisers were questioning whether they were really getting anything out of it and told us that they thought it was still too early for ITV. So we diminished our efforts in ITV, and immediately moved into VOD. VOD took up the next two or three years until broadband came along. Now, we're still very interested in interactivity. But what we're looking at is adding interactivity around video, not necessarily in the video itself. That's not to say that we're opposed to doing single-screen interactive TV. We've talked to EchoStar, DirecTV, Comcast and all the other players about ITV. We just feel that it's not the best match right now for our content and our advertising base. That doesn't mean that we're not hugely interested in it, but we've got to be careful about what we put our time and money and effort into. The growth industry for us right now is broadband, not ITV.

[itvt]: You are, however, participating in OCAP, correct?

Dawson: Sure. We keep an eye on it, but we're not actively involved in developing single-screen interactive television. It's just a matter of timing. When we see the various elements falling into place that will make it viable for us, we'll jump back in. And those elements are starting to fall into place. We're starting to see, for example, those great interactive applications that PixelPlay and CNN are doing on EchoStar; and we're starting to see the influence of the NDS group on DirecTV. But has it reached critical mass yet? We don't think so. There's been no compelling demand for single-screen from either our advertisers or our viewers, so we're sitting on the sidelines. But we are watching what's going on closely, and I do think that the next generation of television has to become interactive. That's what broadband will teach TV. I'd love to be experimenting with it more, but, again, there's no business in it yet.

Let me describe for you the kind of single-screen interactive TV that would work best with our content: you're watching, say, Giada De Laurentiis' show on the Food Network and you know there is a recipe for the dish you're watching her prepare sitting on our Web site. However, you don't want to get up and go to the PC and get the recipe. And you don't want to write down the recipe, scribbling as fast as you can. What could you do? Suppose you could click an icon on the screen and have the recipe sent to your IM or email address or to your cellphone, or to your printer--wouldn't that be cool? So, I went to some of our cable operators last spring and said, "This is what we'd like to do. We don't want to go through the iterations of putting an 'L' frame around our video, and having the viewers click to another page, and so forth. We want a simple, elegant solution for moving information across platforms. Can you do that?" And the answer was "No." When that's possible, we'd love to do ITV that way. I think this kind of application will be possible with IPTV, which can blend different platforms together, but you can't yet do it with regular TV.

[itvt]: Do you see broadband TV "disintermediating" the traditional cable and satellite operators?

Dawson: Well, broadband TV is certainly very powerful: even our demographic, which is slightly older than the 18-34 heart of the market, loves watching video on our Web sites--not least because we can surround it with all kinds of interactive options. However, I don't think we'll see a dwindling of television. Our broadband video efforts aren't designed to get our viewers to bypass their cable operator. It's just part of our whole strategic approach to allow consumers to get our content however, wherever and whenever they want to, on whatever device. If you can do that, you're surrounding them with your brand and you've done a pretty good job. People will still want to watch their favorite shows on regular television, and there will still be appointment viewing. Viewing habits are not going to change that fast. Remember that the people who are watching video online are still a relatively small group compared to TV viewers, and television will be the way it is for a long time. That said, the fact that 5, 10 or 15% of the TV audience is going to move over to these new platforms--and yes, that will happen--is going to change the economics of the business. If that's happening, we're going to try and grab that segment of the audience wherever they go, and we're not going to assume that you can simply rely on appointment viewing any more. You can imagine that the result of TiVo and VOD will ultimately be that a large amount of programming will be on-demand. We're ultimately going to have to learn a whole new way to program. But the challenge of the TV industry, from the programmer's perspective, is to keep doing what you've been doing for all these years, and do it better than you've ever done it before, while simultaneously learning all these new platforms and business models, because that's where at least a significant portion of your viewers are going. When they're not watching TV, they'll be engaged with broadband and with their mobile phones.

[itvt]: Are you working on content for mobiles?

Dawson: We're starting to. We've got a project underway now for The Food Network where we're doing shopping lists on Sprint. We're also talking about putting video on cell phones, though we're not convinced that video is going to be a killer app for our audiences on mobile. We want to be sure we're providing the right content in the right format for the right device, be that text messaging, SMS, audio, slide shows or video. We've also been doing portable downloads for around a year for Microsoft portable media players. We're poking around and testing and learning, and we're slowly picking up knowledge of how people are consuming media on mobile devices.

[itvt]: Could you summarize why VOD and broadband are important priorities for Scripps Networks?

Dawson: Both are important developments in terms of viewer behavior, control and convenience. VOD is important on a pure business level because it's a product that was developed by our distribution partners: it helps us maintain deep relationships with the cable operators. Broadband is important because it has so much potential upside to it. We have a fairly strong position in both platforms, and we see nothing but growth there. However, we believe it will be a challenging business, in the sense that we haven't really figured out how you maintain that growth. It's important to figure out how you use it to supplement what you're doing on TV--in a way that enhances both media. For example, when ABC took its shows "Lost" and "Desperate Housewives" over to iTunes, they got a big lift in the ratings of those shows on linear TV. What was that due to? Well, in part because they made a lot of noise about it and did a lot of promotion, but also, maybe, because viewers saw it on iTunes and it stimulated them to see the next show on linear TV.

[itvt]: Are you interested in offering content on iTunes?

Dawson: Absolutely. We're interested in doing all sorts of downloadable stuff. Of course, our content is quite different than the entertainment content that other broadcasters are offering on iTunes, so we have to figure out what people will go for. Will they pay $1.99 for an information-based show, or only for entertainment? The models need to be looked at, tested and tried. I'm a great believer in both transaction- and subscription-based modeling. I'd love to have a subscription-based on-demand service on iTunes or some other broadband outlet.

[itvt]: But currently the video on your sites is all free. Do you think you could make the transition to a subscription-based model?

Dawson: If it's for exactly the right audience, exactly the right demographic. We're testing all sorts of models out in the field to see if people would pay for it--and, admittedly, it's a big leap for people to pay for content. The Wall Street Journal and a few other companies have been able to monetize content with subscriptions, but it's really only a handful of companies. The reluctance that broadband users have for paying for content will have to be overcome. I do believe that we'll start to see people become willing to pay to get content and services--in specific vertical genres. I don't think people will be that willing to pay subscriptions just for content, but I think they will be willing to pay if that content comes with other services.

[itvt]: Can you say how much revenue Scripps is generating from its broadband video services?

Dawson: I'd love to, but I can't.

[itvt]: Can you say whether those services are in the red or in the black?

Dawson: They're in the black. So far, they've been very successful. Now we're trying to figure out how to make them even more successful and how much better we can do--how we can superserve the end-user and stay ahead of them, so that we know what they want and so that we can give them that with the same integrity we bring to our television networks. Were now getting upwards of 13 million uniques a month between our five sites, and annual growth has been in the double digits in terms of unique visitors.

[itvt]: What makes you passionate about interactive media?

Dawson: I'm really interested in the capacity of humans to communicate with each other. The species needs to communicate for its very survival, and communication has to be two-way. I used to be in publishing for 15 years, and I became very frustrated with it because it is one-way. If we got letters to the editor, we got maybe 20. But when the Web came around, all of a sudden you had this vibrant two-way social aspect that was fascinating. I think what we're seeing today with user-generated content is that people are really tired of one-way. A two-way revolution is taking place: I think that what's happening now with broadband video is that, like the text-based Internet before it, it's giving a voice to people. The model under which programmers push content down that viewers don't participate in is, well, so last century. I think this revolution in two-way communications is a biologic phenomenon--I also see the growth of video communications on the Internet as, in some ways, a return to a primeval image-based communication. Image-based communication preceded the alphabet. Look at the huge growth of photo-sharing sites like Flickr. I think you'll see the same thing in video. The sheer artistry of the video communication now taking place is so provocative and so interesting. When my kid graduated from high school, he had to present his senior thesis in front of the school: he put up a video he shot about advanced tubing on the rivers. Remember the old movie, "The Vanishing Point"?

[itvt]: Yes.

Dawson: He took a scene out of that movie where this kid's jumping off of a building and he freezes him in mid air! He's using film techniques to do his senior thesis. Well, how cool is that and how much more provocative is that than sitting down and writing a piece about how he spent the summer? New technologies have unleashed all this creative energy. The trick for us to do is to bottle it and channel it and give it a voice and, ultimately, to redefine what a media company is relative to it. To a certain degree, we should be opening up channels specifically for user-generated content, and working with visitors to our sites to show them how they can make their stuff of a higher and higher standard. I think the next stage of all this will be a multiplicity of creative output coming from all over the world--which I think is something the world needs, because we are so nationalistic and so stuck in our own ways that all of us need to know what is going on beyond our immediate environments.

[itvt]: What kinds of announcements in the interactive TV/VOD/broadband TV space should we expect to hear from Scripps Networks going forward?

Dawson: More to come, and lots of it: time-shifted VOD, VOD premieres, dynamic ad insertion trials on VOD, new VOD ad models, more original programming on broadband, more broadband channels woven together with video, non-video and interactive content, standalone sponsor channels on broadband, tests of user-generated content, synchronized programming across all platforms. We're just trying to stay in step with--if not a step ahead of--our customer.

URL: Scripps Networks

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