KEY POINTS:
Advertisers are inching into the new media world of video-on-demand online downloads, which are now being provided by TVNZ and TV3.
But some agencies are wary about an emerging industry standard for 30-second advertising clips being shown in front of free content.
TVNZ and TV3 both started offering free online downloads from their websites this year. The state broadcaster has a wider range of content with tvnzondemand while TV3 is largely focused on news clips.
The broadcasters are offering downloads to counter the exodus of free-to-air television viewers to the internet.
They are also preparing for the development of Internet Protocol Television (IPTV) where people can download programmes off the internet on to a computer hard drive and then on to TV sets.
But at an international level it is still not clear whether the costs of these burgeoning services - which will become higher as programme makers secure payments for online rights - will be paid for from subscriptions for premium content, or advertising attached to free content.
"There is still not yet a clear business model, said Jason Paris, the TVNZ head of emerging markets who has been developing the tvnzondemand website.
"Personally I think it will be advertising based rather than people being prepared to pay for content," he said.
But advertising executives approached by the Business Herald were not so sure. They warn that running commercials in front of free download content could be a turnoff.
"We are moving to an on-demand world where if you want something you will pay to get it," said Ron Sneddon of advertising agency Mr Smith.
Mediaedge:CIA media director Sean McCready was also wary.
"Preload ads go against the whole nature of the media experience. On demand means you see things when you want to see it.
"To have a standard 30-second commercial play unannounced before your requested clip goes against that."
TVNZ agrees that for small clips the 30-second ad does not work, and is changing the model for these so the clips have a 5-second sponsorship at the front and 30-second ad runs at the end.
Paris says the debate over business models is symptomatic of the embryonic stage and change for this new media. On-demand television downloads moved into a new phase in this country last week with TVNZ signing a deal for a channel of TVNZ content screened on the Google-owned YouTube website.
Under the deal TVNZ will post video clips ranging from two minutes to 24 minutes.
Whole programmes available for free download on YouTube represents a first for an Australasian broadcaster.
The YouTube TVNZ channel will have about 20 per cent of the video content that is on TVNZ's own download website tvnzondemand.
Paris predicts that the new media arm of TVNZ will grow from virtually nothing to 10 per cent of TVNZ revenue in three years.
Going from $3 million to $40 million in three years is an ambitious target.
Ron Sneddon of Mr Smith says broadcasters should be cautious about attaching ads to clips.
He said the subscription model had worked well in a campaign for the internet service provider slingshot, where new subscribers were given free access to TVNZ's desktop television subscription service that offered 10-minute clips of highlights from overnight America's Cup races.
The new medium was a work in progress.
"Everybody is trying new things and through trial we will find what suits everybody's brief.
"What we know now is that numbers are small with only about 30 per cent of the country with broadband."
Sean McCready agrees. "The on-demand offer is very much in its embryonic stage, with TVNZ and to a lesser extent TV3 having only started offering advertising around on-demand video this year."
Currently only a few advertisers were committed and a few adventurous ones would pioneer on-demand video advertising, he added.
WEB WATCH
* Broadcasters are offering downloads from websites to counter the flight of free-to-air viewers to the internet.
* It is not clear whether internet TV services will end up being funded by advertising or subscription.
* NZ advertisers are concerned one business model, running ad clips before the free downloads, will turn off viewers.
