Addressable TV Faces A Problem. Verance CEO Nil Shah Has A Solution

Television is undergoing a seismic shift. ATSC 3.0, also known as NextGen TV, advances the current antennae-based system by implementing a new technology which allows for higher resolutions, like 4K, and for richer sound. The cutting-edge tech also provides the consumer with a more interactive experience, such as allowing addressable television for over-the-air signals. 

But while this brave new television world offers new opportunities for viewers, media companies and advertisers, it also presents some serious challenges. 

In this Q&A with Verance CEO Nil Shah, he identifies one thorny issue and a potential solution. Shah has been with his company since 2006. Previously, he worked as CEO at both marketing software company [x+1], Inc. (formerly Poindexter Systems) and customer relationship management solutions firm Interelate, Inc. Shah holds an MBA from the Wharton School at the University of Pennsylvania and a BS in Physics from Yale.

This interview has been edited for brevity and clarity.

Explain ACR in a way that an industry outsider could understand.

ACR stands for ‘Automatic Content Recognition.’ It's important because we're playing all sorts of things on our TVs—and the TVs don't know what we're playing. If you're in a digital environment, typically a mobile phone or a browser, you know what content is delivered to that device. But with respect to a TV, there's so many ways content can be transmitted to the device, whether it's over the air or through cable or satellite. In those cases, being able to recognize the content is an important thing.

What’s the central problem, as you see it?

There’s a technology called fingerprinting. But it's not as good as the distinct fingerprints we have on our hands. So if there was a crime scene, and there were fingerprints left behind, they could trace it to either you or me. In the fingerprinting technology that happens on televisions today, the TV cannot distinguish the difference and wouldn't know how the content is being distributed to the consumer.

Seinfeld is an example. You have Seinfeld on Netflix NFLX and in syndication, like on TBS. 

[Note: Seinfeld currently streams on Hulu and airs in syndication on local television stations and cable network TBS. In 2021, the sitcom will continue to air on local stations but will begin streaming on Netflix. For cable, the series will move to Viacom VIAB properties like Comedy Central, Paramount Network and TV Land.]

Why would the industry care about the lack of precise TV show fingerprinting?

As content, particularly broadcast content, becomes more interactive, it's important to know precisely how something's being distributed, such as for dynamic advertising insertion [DAI]. Dynamic advertising is the ability to send you an ad that's different from the ad going to me. In order to do that, you need to know not only what content each of us is watching, but how it's being distributed to us. 

If I'm watching Seinfeld on Netflix and pause the playback, that shouldn't be an opportunity for an ad to play because I get up to go get a bowl of popcorn.

Also, if we want to measure viewership, it's important to know if the Seinfeld episode was on TBS and not some other place.

Why is that important in terms of the measurement?

Measurement is usually allocated to a particular distributor. Advertisers want to know how many people are watching TBS or wherever Seinfeld might be in syndication.

But Netflix doesn’t want to participate in the Nielsen ratings, right?

Yes, Netflix has been very clear that they don't want [external] measurement.

CBS VIAC All Access, Disney+, Peacock—they're owned by companies that also have broadcast and cable properties. Netflix is different.

That's true. CBS All Access may already be selling ads into their service. They certainly don't want another company to step on that. 

Yesterday, I learned the Nielsen technology that's going to be able to do this dynamic advertising insertion, DAI, we're talking about will be available on televisions in fourth quarter [of this year], in just a few months, on LG Electronic TVs. 

So, you go out and you buy a 40-inch TV for Christmas. You set it up and now this Nielsen DAI technology is available on it. You turn on CBS All Access, which sold a digital ad into its OTT service. If Nielsen says, ‘I'm going to replace that ad,’ CBS Viacom is going to go crazy.

Nielsen wouldn't intentionally, but that is a potential stumbling block.

Nielsen is going to be a good actor in the industry, and say, ‘No, we're not going to replace the CBS All Access ad, or we're not going to insert ads into Netflix.’ But in some cases, they might not even know because of their fingerprint, the type of technology they're using. They can't tell the difference between those two pieces of content that gives rise to that particular use case, where they could be inserting an ad into Netflix content.

[Note: Kelly Abcarian, General Manager, Nielsen Advanced Video Advertising says that: "This is not an accurate understanding of how Nielsen’s addressable TV platform works. We have developed a DAI solution for the TV marketplace that leverages unique, IP backed addressable triggering technology that factors in all edge cases required for linear addressable TV to operate across all scenarios. Simply said, Verance has pointed out a hypothetical issue that we have already solved for and our addressable TV platform is delivering on the confidence and accuracy we know the entire marketplace requires."

Verance responded with this statement: "Verance is responding to actual problems that TV makers and streaming service providers have brought to our attention.”]

The situation sounds like an issue for the media companies and TV manufacturers. Why should a consumer care?

If a consumer is paying a subscription fee to get an ad-free experience, for example, if either they're subscribing to Netflix, or they've got the ad free experience for Hulu, then this is something that should be sacrosanct for them, right? It's part of what they're purchasing. 

For an AVOD [advertising video on demand] service, such as on Hulu, and the ad is replaced, then Hulu isn’t getting the ad revenue. It's going to make the service more expensive.

You're saying the industry needs to find a solution as soon as possible since the TV sets are getting shipped this quarter, before there’s a huge issue, right?

Yes, Nielsen isn't actually trying to insert on Netflix. I don't think anyone has bad intentions. It's could be unintended consequences. I’m looking further out ahead, saying, ‘Hey, we should do something about this’ because as soon as ads start showing up in Netflix, consumers are going to be turned off to this technology. 

What’s the solution?

The solution is the ability for Netflix and other SVOD [subscription video on demand] services to privately signal TVs that their content is being played back. 

When you're watching Netflix on your TV, if you're actually watching it on an app that's native to the TV, the TV knows that that Netflix app is running. There's no issue there. 

If you're running it on an Apple TV, or from a set top box, then that content is coming through your HDMI connection or however you're connected that to the TV. Then, the TV has no idea that you're watching Netflix. In that case, what we're proposing is that Netflix be able to privately message the TV and say, ‘Hey, this is Netflix content. Don't measure me and don't manipulate the video.’

That’s a solution for SVOD, but what about AVOD?

With your ad-supported Hulu, you're going to send a private message to TV that says, ‘Hey, this is ad-supported Hulu don't allow dynamic advertising to happen on our signal.’ 

The third case might be, ‘Hey, I'm a broadcaster and I want dynamic advertising to happen.’ 

What is your suggested solution?

It's ACR+. You have to be able to identify the content in a more and more discriminating way. But then you also need to be able to tell the TV. That's the solution—a TV needs to have a series of private messages going back and forth. 

Those messages need to be private for the very reason that Netflix and the others don't want to be measured. If they're public messages going back and forth, then someone could intercept them and see that Netflix content is being played and somehow infer viewership. 

What’s your company’s stake in the solution?

We [at Verance] have been in the industry for 20-plus years and are in 350 million consumer devices. We have a history of building technologies that solve industry problems. It's actually challenging to put technology into consumer devices. When you're talking about hundreds of millions of devices, it's important to have bulletproof technology.

The technology that we've used in those 350 million devices is an audio watermark, a very simple two-part system. You put the audio watermark into your content. Hollywood Studios use it today. In the consumer device, there's a watermark reader listening for that watermark. Here's the watermark, so the device knows the content has been pirated. 

Very simply, this could work the same way. You could have content that is watermarked, and then a watermark reader in a television and if it reads the watermark, it says, ‘Oh, this is Netflix content, don't measure and don't manipulate.’

Update: This story was updated on 10/26/2020 to include Kelly Abcarian’s statement about Nielsen’s addressable TV platform and Verance’s response.