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1. Airline Media
Its future in a changing media landscape
Craig Waller
Chief Marketing and Sales Officer
Pace Communications, Inc.
September 14, 2006
1

2. The Wider Media Market
McKinsey & Co. has been informing Fortune 100
marketers that by 2010, traditional TV advertising will be
one-third as effective as it was in 1990.
McKinsey & Company media
proliferation projections for Real ad spending on prime-time broadcast TV has
2010 assumes: increased over last decade by about 40% even as
viewers have dropped nearly 50%.
15% decrease in buying power
driving by cost-per-thousand
rate increases Cable can claim a larger share of the coveted
18-49 audience in primetime for the broadcast
23% decline in ads viewed due
to switching off
season through late March 2006.
9% loss of attention to ads due Cable’s share of the primetime audience has ranked
to increased multitasking
No. 1 in households since the 2003-04 season.
37% decrease in message
impact due to saturation.
2

3. Erosion of Mass Media
Marketers have already moved a portion of
their ad dollars to the Internet
PricewaterhouseCoopers says
Internet advertising revenues
reached a new record of $3.9
billion for the first quarter of
2006.
The 2006 first quarter
revenues represent a 38%
increase over Q1 2005 at $2.8
billion.
Within the online advertising
category, spending in 2006 on
video and media such as pod-
casts, is expected to be about
$1.8 billion, according to
JupiterResearch.
Source: PwC/IAB Internet Advertising Revenue Report
3

4. Impact of the Internet: Advertising Buy
Pontiac G5 to Advertiser via Internet-only:
$20 Billion Ad Spend
20% less in five years
All of Pontiac's marketing dollars to introduce its G5 coupe
Interactive-buying shop are being spent online.
Jumpstart Automotive Media,
estimates that within five years
auto marketers will get better Digital debut costs less
ad bang for 20% less in ad The G5's digital debut is estimated at costing 60% to 70%
spending.
less than a traditional car launch. A launch for a new
This could mean $4 billion model typically runs between $25 million to $30 million.
draining out of auto’s mass
media budgets.
Online and Traditional Media Branding Power
TV ads build brand awareness, The key for old-line media is making "old" and "new" media
but the car companies are now
trying to directly reach the work together – an integration of the message.
critical audience of “in-market
intenders."
4

5. The Issue
Media distribution has become less constrained
Changes in Media
Consumption Consumers looking for content that's visible and personalized
specifically to them.
According to a Ball State
University’s Center for
Media Design study during The issue to advertisers has become the re-aggregating of this
the past five years, fragmented audience, who consume multiple media types during
Americans use their any ‘one’ time period.
computers more than any
other form of electronic
media except TV. Ad messaging needs to address multiple media platforms
What understaffed ad agencies are looking for are turn-key
solutions for re-aggregating the audience. These solutions must
be simple to implement and should cover multiple content
platforms.
5

6. Integration
This issue is: engaging consumers with your message
Media Integration – Offering More Platforms to Advertisers
to Reach the Fragmented Audience
Inflight Fragmentation
The issue becomes one of measurability; cost efficiency and
Multiple channels on ease of media execution.
inflight TV / movies
At issue for IFE providers and their airline partners, creating a
Multiple magazines and partnership to implement full-service advertising packages which
catalogs in the seatback
pocket
provide advertisers with a simple, clearly targeted vehicle to
message a fragmented audience at an attractive price.
Advertising/promotions at
the terminal or in the Packaging media helps alleviate the problems of ‘buying’ airline-
airline clubs focused advertising on multiple media platforms to dealing with
multiple vendors for the airline.
Distraction from personal
entertainment devices
from i-Pods to cell phones The ad agency want to ensure their campaign is reaching an
engaged audience – engaged in the media content as well as the
advertising.
6

7. Cutting Through The Clutter
Awareness is the bulk of current ad The new three-part process for executing integrated
campaigns, today. Experts say marketing programs that reallocate advertising and marketing
spending on mass-awareness or dollars: awareness; engagement and relationship building
branding needs to take a turn toward
more customer-centric engagement and
relationship-building activities.
Engagement is the piece of the
process that allows consumers to
respond, participate, and interact with
not only a media platform but also an
advertising campaign.
Relationship building allows
consumers to stay in touch and extend
their interactions through mobile
marketing, experiential marketing,
email, blogs, and RSS feeds.
7

8. What’s in the Marketplace
1. How are major marketers buying integrated
platforms?
8

9. Case Study
Chrysler Integration Deal with CNN
CNN brokered an ambitious sponsorship campaign, signing a multi-million dollar deal with Chrysler
that covered every digital platform. Chrysler’s campaign focused on reaching audiences outside of the
home.
The deal includes on-air, print and online as well as wireless, pod-casting, video on demand and
interactive TV components, making Chrysler the sole sponsor for CNN’s coverage of the selection of
its corporate sibling Time’s Person of the Year.
Chrysler-sponsored a one-hour documentary that was aired on Dec. 18, 2005.
CNN profiled all eight candidates via VOD, podcasting and online, with each segment
wrapped by Chrysler promos customized for each of the individual platforms.
Eighty percent of CNN’s ad revenue is now tied in with integrated TV and online buys,
up from 20 percent in 2003.
The deal was a logical extension of Chrysler’s media strategy. Chrysler Group invested
in its Web advertising budget by increasing their web budget by 20%
Last year the automaker spent $1.6 billion on all of its media buys; of that over $40 million was
funneled online advertising.
9

10. What’s in the Marketplace
1. How are major marketers buying integrated
platforms?
2. How are inflight media content providers showing
audience engagement?
10

11. Creating Engaging Content
Opportunity: Proving engagement of
passengers, as readers and viewers of IFE,
because of it’s a quality environment.
Presenting Arbitron
Results/analysis of inflight media
Engaged readers/engaged with
advertising
Active, engaged viewers of
programming and ads
11

12. Research Objective
Goal
To examine the level of engagement airline
travelers have with inflight media including
airline magazines and inflight TV.
12

13. Media Engagement and Behavior
Actions Taken
Awareness and Actions
86% of respondents were aware that
they could take the inflight magazine
with them at the end of the flight.
Have you ever acted
upon information that you 67.8%
found in [MAGAZINE]?
68% have acted upon information that
was found within the inflight magazine
Have you ever written
down information that you
Nearly two-thirds have written down or found in [MAGAZINE] or
63.7%
torn out a page from an issue of an torn out a page?
inflight magazine.
Have you ever kept a
copy of [MAGAZINE] to
More than half of respondents have take with you when you
50.3%
taken the inflight magazine with them left the plane?
when they deplaned from their flight.
13

14. Engagement and Behavior
Actions Taken
91% of respondents ‘trust’ the information Engagement with Media
that they read in their inflight magazine.
You trust the information you read in
90.7%
88% felt that reading their inflight magazine [magazine]
was a good way to pass time during their
flight.
Reading through [magazine] is a good way
88.2%
to pass time on your flight.
78% said they would ‘miss’ their inflight
magazine if it were no longer available to
You would miss [magazine] if it were no
them on their flights longer available on your flights
77.7%
71% stated they read the inflight magazine Because you are on a plane, you read
more closely than they would read a [magazine] more closely than you would 71.1%
consumer magazine (somewhere else), read a magazine somewhere else.
because they were flying.
14

15. Advertising Awareness
72.8%
Ad recall WITH visual aid
Advertising Recall
Respondents were asked to remember an ad for
Bose headphones which appeared in all 3-inflight
Unaided, magazines.
52.0%
The first question was unaided with no visual help.
52% of total respondent recalled a Bose ad.
When shown an image above of the Bose ad
which appeared in the March issue of the inflight
magazines, 73% of all respondents noticed the ad
in the March issues.
15

16. Inflight TV
Inflight Viewing Habits and Frequency
Of those respondents whose flights Inflight TV Frequency
typically have inflight TV shown:
All of the flights
29.6%
(4 of 4)
• 85% watched inflight TV two of 4 85% watched
flights – or – at least one time during Most of the inflight TV
32.0%
their round trip flight. flights (3 of 4) 2 out of 4
flights
Half of the
• 62% of inflight TV viewers watch the flights (2 of 4)
23.5%
programming three of 4 flights out of
their past 4 flights. Some flights 13.5%
(1 of 4)
Never 1.5%
16

17. Inflight TV
Engaged Viewers
IFE viewers were asked to rate their
level of agreement to three statements
regarding inflight TV viewing. The scale Strongly Agree
ran from: strongly agree, agree
somewhat, disagree somewhat to
There are times when
strongly disagree. you were really glad
you have the inflight
82.7%
TV programming on
83% strongly agree that there are [airline] available to
watch on your flight
times when they were really glad to
have inflight TV programming to
watch on a flight. You would miss the
inflight television
programming on 76.7%
77% strongly agree that they [airline] if it were no
longer available on
would miss inflight TV programming your flights
if it were no longer available on their
flights.
17

18. Advertising Awareness
Do you recall seeing an advertisement for Panasonic
Toughbook / InterContinental Hotels Group while watching
any inflight TV programming on a recent flight?
44%
Ad recall WITH visual aid
Unaided, Advertising Recall
37.0% Respondents were asked if they recalled a specific
inflight television advertisements – an unaided result.
Respondents were then shown a video clip of the inflight
TV ad.
Two of five inflight television viewers remembered
seeing a specific inflight TV commercial, in the past 30
days.
Base: Watched inflight TV programming since March 1, 2006
18

19. What’s in the Marketplace
1. How are major marketers buying integrated
platforms?
2. How are inflight media content providers showing
audience engagement?
3. What is the near-term future for IFE?
19

20. Inflight Media Issues
Good News Bad News
Integration Opportunities Fragmentation of Audience
Cabin environment, a strong plus
Fragmentation – more difficult to sell
Increase in quality – print & TV
Creates expectations by consumers
Measurement
Lack of measurement
Integrated Marketing Programs -
rising Personal entertainment devices /
Internet
Regional Advertising - rising
20

21. Future from an Airline POV
Inflight magazines can continue to prosper because of its broad
reach and affluent, elusive audience
You need suppliers can produce high quality content that
reflects upon the brand and attracts interest from
advertisers
You need a publisher who will invest in attracting new
advertisers / ad categories
Someone needs to invest in research
Multi-channel AVOD fragments the audience for advertisers
Sponsorship / ‘roadblock’ advertising opportunities and
branded content offer the best chances
21

22. Future from an Airline POV
Integrated Marketing Opportunities Offers the Biggest Opportunities
Hard to execute
Advertisers want added-value
Advertisers want access to Frequent Flyer Program database
Co-marketing opportunities
Internal accounting / partnership marketing
Regional Advertising Will Continue to Grow
Limited opportunities in print / difficult to deliver in print
If it can be delivered accurately and effectively via TV it could be interesting
22

23. Summary
Inflight media at this moment remains a viable advertising vehicle for targeted
audiences of upscale, influential business travelers.
Multiple channels provide the customer with much choice, but limit the airline’s ability to
message their core customer consistently as well as pushing up the cost to advertisers.
Multi-channel opportunities require greater amounts of engaging programming.
Inflight magazines remain a great way of maximizing reach.
Advertisers require:
Measurement of viewers/readers in all channels.
Mass reach of audience through engaging, high quality media vehicles.
Integrated marketing programs/partnerships.
We have to continue to invest in research, high-quality content and to promote the category.
23

24. Thank You
Changing the inflight media landscape
Craig Waller
Chief Marketing and Sales Officer
Pace Communications, Inc.
September 14, 2006
24