NEW YORK -- The video-on-demand (VOD) revolution that seemed distant a few years ago has not lived up to everything promised.
A panel of television executives here at the Advertising 2.0 conference offered some reasons why, starting with the complexity of distribution schemes.
"We are all still working through what lives on our networks versus what lives on our dot-coms versus what lives on syndication," said Greg Clayman, executive vice president of digital distribution and business development at MTV Networks, a unit of Viacom (NYSE: VIA).
With Americans watching upwards of 10 billion videos online each month, video on the Web can no longer be thought of as a niche market.
And TV companies are learning that if they don't provide a user-friendly channel for accessing their content online, the pirates will.
Clayman said his team got nervous when it observed that South Park, which airs on MTV Networks' Comedy Central channel, was the most frequently shared program on the peer-to-peer site BitTorrent.
MTV's response was to roll out South Park Studios, an ad-supported site offering full-length episodes of every South Park show ever aired.
Clayman said that the site has been a great success. Exchanges of South Park episodes on BitTorrent have declined, while on-air ratings have risen.
Bernard Gershon, senior vice president at the Walt Disney Co. (NYSE: DIS), said his team had arrived at a similar method. "It's certainly a piracy-combating move to offer high-quality content online," he said.
The question of how to monetize that content once it's online is a harder proposition. The iTunes model, in which viewers can download full-length episodes of shows such as Lost to own for $1.99 is simple enough. But streaming video is trickier.
The model of Hulu, a joint venture of NBC and Fox, pairs pre- and midroll ads with full-length episodes of TV programs, but they aren't targeted like traditional display ads on Web sites.
The panelists said that dynamic ad serving is the ultimate goal for video on demand, but that the technology isn't sophisticated enough to support that model yet.
They also noted that metrics of streaming video viewers aren't yet sophisticated enough to get cost-per-thousand, or CPM, impressions pricing where they would like it.
"When you look at what's possible online, you'd think that these are the things that would makes sense for a VOD environment," Clayman said. "That just doesn't exist yet."
Then there's the question of the format of advertising.
Amy Carney, president of advertising sales for Sony Pictures Television, said that online medium demands a distinctly interactive ad format. "Too often TV advertisers are just repurposing TV ads and putting them online, and that doesn't really work."
A more compelling format would entice the viewer to engage with the content by hovering or clicking on an object on the screen. That type of advertising would also lend itself to more-effective engagement tracking, even though it might not fit into the traditional CPM model.
While the panelists agreed that the largest amount of revenue for television companies will continue to come from the traditional 30-second on-air spots, they see signs of convergence at hand.
Clayman pointed to the early breed of devices -- such as Microsoft's Xbox, Sony's PlayStation and Apple TV -- that will lead the way to adopting Internet protocol television, or IPTV .
In five or seven years, Clayman said, "I think you'll see the lines between cable and online blur."