The value of television Advertising nt ie n e v n o c The in bout truth a mercials TV Com Advertising Free-to-air broadcasting is free… …because it is financed by advertising. RTL Group 45, boulevard Pierre Frieden 1543 Luxembourg Luxembourg T: + 352 2486 5201 F: + 352 2486 5139 www.RTLGroup.com Status: 1 February 2010 2 RTL Group The inconvenient truth about TV commercials Adv ert pay ising s advertising Drives businesses − and TV is one of the most efficient fuels. RTL Group 3 Advertising Enjoy the break Photos: Deutsche Telekom PAge 14 4 RTL Group The inconvenient truth about TV commercials Contents 6 CEO statement 8 Free-to-air: how TV channels safeguard quality content for all 10 The leading medium: how TV advertising works 14Enjoy the break: effective commercials make great entertainment 18 Regulation: why ad bans don’t necessarily protect consumers 24Double vision: how TV and internet complement each other 28 what next? Six rules for watching TV in the future 30 Facts & figures: commercial breaks, advertisers and products 32 Spots, crawls and split screens: the diversity of ad formats RTL Group 5 Advertising Chief Executive’s statement TV will continue to be the lead medium for a long time to come − not only for viewers, but also for advertisers. This brochure explains how and why. I’m sure you’ve heard it before – and maybe you’ve even said it yourself: TV commercial breaks are when people leave the room, or change channel, right? And yet, each day, over 200 million viewers all over Europe watch RTL Group’s free-TV channels, which are financed by advertising. Each day, our channels air more than 11,000 commercials, booked and paid for by hundreds of different advertisers. How can this be? The truth is simple: efficient TV advertising is often excellent entertainment. Commercials work when they tell interesting stories, appeal to our emotions, inform and surprise − in short: when they are just good television. And viewers understand that great TV content has its price − talent shows and coaching formats, news and sporting events, reality and fiction series. In the case of free-TV, the price is paid not in money, but in attention. In fact, the popularity of TV has always raised concerns from many politicians and regulators. Despite improvements to the new European TV 6 RTL Group The inconvenient truth about TV commercials Gerhard Zeiler Chief Executive Officer directive, broadcasters still have to deal with excessive regulation. Regulation that tells us − unlike other media − precisely how much, and when advertising may be shown. As if responsible citizens exist among other media users, but not among TV viewers. Legislators are also increasingly considering advertising bans or complex restrictions on entire groups of legal products. We clearly see the importance of severe problems such as obesity, excessive drinking or dangerous driving, and address them in our programmes, but to blame advertising is nothing but populist. Advertising restrictions won’t solve these problems. In recent months, it has become clear that in an economic downturn, people watch more TV. That’s the first piece of good news for us. The second is that without TV there can be no growth through advertising. TV is still the best medium for reaching a mass audience − especially in the digital media world with its many distribution channels and small target audiences. Here’s your chance to make up your own mind... happy reading! Gerhard Zeiler RTL Group 7 Advertising 1. Free-to-air broadcaster takes a risk when investing in programming − such as news, drama, factual entertainment, sports rights and big entertainment shows. 2. Watch and enjoy: Broadcaster airs this programming so people can watch for free. The virtuous circle 5. The more revenue the broadcaster generates, the more money it can invest in even more attractive programming. Back to number 1. 8 RTL Group Once a new programme has become an audience favourite, the broadcaster and the production company can use the ‘format’s brand’ to generate additional revenue streams. The inconvenient truth about TV commercials Shows also become available free online for a certain period of time once they have been shown on regular TV − so viewers can ‘catch-up’ with their favourite show any time, anywhere. 3. The broadcaster offers advertisers slots during the programming, for which the advertiser pays, the price depending generally on the number and demographic of the people who watch. But there are also pay options, either for selecting archived shows and films or for watching episodes before they are broadcast. Photos: iStockphoto, Sony BMG, Picture-Alliance/DPA TV appeals to people’s emotions, and that’s what advertisers also wish to appeal to. So TV and advertising is a happy marriage, and the offspring of that marriage is free-to-air broadcasting. Here is how it all works. 4. The more people watch, the more money the broadcaster receives. RTL Group 9 Advertising We have seen the future of advertising and... 10 RTL Group The inconvenient truth about TV commercials Remember when people said the internet would be the death of print? But who wouldn’t want a share of Amazon’s book trade? People also insisted that the internet would mean the end of writing. But indeed, we’ve witnessed an enormous and democratic proliferation of words in blogs, tweets, customer reviews and online communities. Internet killing off postal services? We refer to Amazon again, or Ebay. In the same way, pundits fairly routinely predict the death of the television commercial in the face of internet competition. But hey, we’ve all seen what happens to the pundit’s view. And the indications are that they are talking nonsense − again. ...it still comes in a box Of course TV advertising will change in format and content – as it has since it began – and as you’ll see on pages 24 to 27, it works very well with the internet. But it will be a long, long while before consumer businesses risk removing television from their advertising budgets, if indeed, they ever do. TV is the leading medium, and people’s third main activity behind sleeping and working. Television remains one of the most effective and efficient advertising media. Sales still sky rocket with a well-made TV campaign – and growing businesses also create new jobs. The average western European supermarket group launches about 26,000 new or seasonal products a year. Marketers crave attention for these products, and they know how to get it. They choose television. RTL Group 11 Advertising Let’s look at some of the reasons why TV is still king of the advertisers. TV is part of everyday life 97 per cent of European households own a television and it plays a central role in most people’s lives. TV is a true mass medium TV viewing is on the increase almost all over the world and is the most efficient form of communication with the mass populace. In Europe, people spend an average of 227 minutes a day viewing. TV addresses the emotions It’s a stimulating feast of moving images and sound. Added to that, people watch it when they are relaxed, with their barriers lowered. This isn’t just opinion – many neuroscience studies demonstrate that the parts of the brain most stimulated by TV are those relating to emotion and long-term memory. TV is the most persuasive TV reaches many people in a short space of time, and TV ads also offer people a common viewing theme to talk about. In a 2008 Nielsen survey 69.9 per cent of people said TV advertising was the most persuasive, compared to 9.5 per cent for newspapers and 5.1 per cent for the internet. If you see it on the television screen, you have “seen with your own eyes”. Price Waterhouse Coopers’ Payback study supports this by showing that on average, TV ads paid back 4.55 times in increased sales, 30 per cent more than press ads, the only other medium to show consistent payback. 12 RTL Group The inconvenient truth about TV commercials TV advertising − any time, Any place, Anywhere Interestingly, new technology makes entertaining TV ads all the more powerful as people can now watch or download them at the click of a mouse, mail them across the world and blog about them online. TV allows to measure return on investment TV is the most measured medium and offers the most accurate data. This research provides a currency for buyers and sellers and generates a degree of trust. The measurement even extends now to establishing which TV channels are most effective for ads − a new study devised by RTL Belgium in cooperation with US statisticians eliminates a number of different variables to prove that the same message can have different impacts depending on where it is screened. TV strengthens the performance of other media It establishes the central concept of a major campaign which then resonates through other media. TV allows precise targeting Advertisers can pinpoint demographic and geographic groups quite precisely. And again, new technology makes this all the more powerful, with niche channels allowing even more precision. TV offers flexibility as well With a multitude of channels, advertisers can place their campaign in many formats in many different programmes, to best meet their goals. RTL Group 13 Advertising That’s advert-ainment Television adverts often make great entertainment, and play to people’s emotions. And when people enjoy the ads, they keep watching, the ads become a talking point and they create brand loyalty. Whether they are edgy car ads, comedy beer ads, or a series of coffee or cooking ads like a TV series in their own right, people like talking about them, sometimes even for years after they stop showing. So, are entertaining ads effective ads? The latest research seems to think so...The recent IPA book, Marketing in the Era of Accountability, is a rigorous analysis of advertising effectiveness. Its findings include: “The most effective campaigns are those that rely primarily on emotional rather than rational models.” And: “Emotionally based campaigns... outperform rational campaigns on every single business measure.” Recent though the research may be, it isn’t news to the ad makers of yesteryear. Way back in the 1970s, Martin Boase, founder of agency BMP, said: “We believe that if you’re going to invite yourself into someone’s living room, you have a duty not to shout at them or bore them or insult their intelligence. On the other hand, if you’re a charming guest, and you entertain them or amuse them or tell them something interesting, then they may like you a bit better.” 14 RTL Group The inconvenient truth about TV commercials Alternatively, we can get today’s view, from Martin Krapf, CEO of IP Deutschland, RTL Group’s German ad sales unit: “TV is a mass medium that makes an emotional appeal to several human senses simultaneously. No other medium can do this. What’s more, cognitive research on Deutschland sucht den Superstar (Idols) shows that the deep emotional involvement of the audience in the programme reinforces the impact of the ads shown during it.” It stands to reason, doesn’t it? Our decisions are influenced predominantly by emotion. The best TV ads aren’t those with a specific message they’d like us to remember, they’re those that make us feel good about a brand. Take a look at the panels on recent Deutsche Telekom and Cadbury ads. Deutsche Telekom Photos: Deutsche Telekom See more: youtube.com Paul Potts auditioning on the hit show Britain’s Got Talent was used to represent Deutsche Telekom’s brand promise ‘Life is for sharing.’ The moving footage of Paul realising a dream touched everyone’s hearts and made for a campaign that people wanted to see time and time again. By entertaining and engaging your audience, you can effectively create interest and loyalty for your brand. RTL Group 15 Advertising Cadbury See more: youtube.com What has a gorilla drumming to a Phil Collins song got to do with chocolate…? … it doesn’t really matter The commercial was a monster hit with the British public, and having been uploaded to YouTube shortly after it first aired in 2007, was viewed over 500,000 times in the first week. As it had everybody talking about Cadbury, it certainly helped to reinvigorate the brand. What’s more, Cadbury reported revenue growth of 5 per cent for 2007, with their annual report attributing the growth directly to a combination of a product relaunch and the gorilla campaign. 16 RTL Group Photos: Cadbury The inconvenient truth about TV commercials Still not convinced? Well, think of all those car commercials that put a smile on everyone’s face, even though we’ve seen them so many times. They entertain, amuse and often become a great talking point among friends and work colleagues. They’re the water cooler conversation every soap and sitcom creator dreams of. That’s the strength of TV advertising: it can be used to invent stories, to entertain, and ultimately, to make products more attractive. And it looks like television − whether on big screen, small screen, split screen or tiny screen − will be the place to tell these stories for some time to come. RTL Group 17 Advertising The regulation industry In these bureaucratic times, it seems any of society’s ills can be addressed by forming a committee, creating a regulation or setting a target. Trouble is, seemingly well-meaning regulations can backfire. Give hospitals efficiency targets and they might concentrate on the easy cases rather than the serious ones. And school league tables of exam results, supposedly designed to offer parents choices, often mean the marginal child who might not pass, doesn’t get entered for the important exam, so as not to harm the school’s percentage rate. In our own business, TV advertising is one of the most heavily regulated areas in media, and by far the most heavily regulated form of commercial communication in Europe. Perhaps this shows the power of television? But perhaps it also underestimates the intelligence and responsibility of viewers who, with the remote control in their hand, decide within fractions of a second whether or not shows or commercials appeal to them. Here we offer a selection of opinions or findings, as a little food for thought. 18 RTL Group The inconvenient truth about TV commercials In May 2008, the German news magazine Der Spiegel reported about strict rules on advertising planned on the European level: “F rom breakfast cereals to Coca-Cola, everything is classified into whether it is good or bad for people. Apparently, people are no longer allowed to decide for themselves... Now the ‘moral bullying’, says liberal MEP Holger Krahmer, has reached what is perhaps Europe’s most sensitive and most important industrial product – the car.” The article describes proposals that would require every ad, every poster, and every TV spot to state the fuel consumption and CO 2 emissions of the advertised car in large and clear letters. Meanwhile, any reference to fun and sportiness would be taboo. Selections from the Television Opinion Monitor study in the UK by Ipsos Mori for Clearcast: advertising is cited as only the 9th most important factor in influencing under-age drinking. 74 per cent of respondents said they didn’t think a ban on TV advertising would have any influence on under-age drinking. •T V advertising is seen as only the 13th most likely factor caus ing childhood obesity. 87 per cent of respondents think advertising restrictions will have little or no effect on childhood obesity. • TV “W ithin a few months of HFSS (high fat, sodium or sugar content) ads being banned from children’s programming in the UK, the British regulator Ofcom sent a message to broadcasters complaining about the scarcity of original children’s programming being created. Where do they think the money comes from?” David Brennan, Thinkbox RTL Group 19 Advertising Taken from UK supermarket chain Sainsbury’s responses to Ofcom’s consultation on TV advertising of food and drink to children: 2005, we spent £7 million advertising fruit and vegetables on television. It would be unfortunate if any curbing of (food) advertising limited consumer exposure to advertisements... promoting consumption of healthier products. •H ow will HFSS products be defined − would an avocado fall into the HFSS category? •A policy based on self-regulation... driven by customer demand − will produce more innovative ways to help consumers make healthier choices... Conversely, more regulation could have the opposite effect. • In On the same topic, Christine Albanel, the former French Minister for Culture and Communication, said in an interview with the French newspaper Les Echos in June 2008: “F ood advertising... is strongly involved in funding youth programming, specifically animation, which constitutes one of our strengths. Youth channels... would be on the verge of bankruptcy if we banned them from running these kind of campaigns. Producers would stop producing animation and would turn to, say, home shopping. The results of this kind of policy can be seen very clearly in the UK: as soon as food advertising was banned in youth-oriented programmes, animation disappeared from the screens − and yet that did not solve the problem of obesity among children.” 20 RTL Group Photo: Laif/Davide Lanzilao The inconvenient truth about TV commercials “The aim for Europe’s audiovisual content industry is to flourish under one of the most modern and flexible set of rules in the world.” “We also must accept that we are in a single market where disproportionate rules, like some advertising bans, are problematic.” Viviane Reding, European Commissioner for Information Society and Media, on advertising regulation in Dec 2005 and Sept 2007 RTL Group 21 Advertising ! CAUTION This may be an advertisement 22 RTL Group The inconvenient truth about TV commercials European Union regulations on TV The main EU legislation, Television Without Frontiers, dates from 1989 and has recently been updated by the European Audiovisual Media Services Directive (AVMSD) which modernises the legislation and extends it to what is known as ‘pull content’ – that is, content such as video on demand, where transmission time is chosen by the viewer rather than scheduled by the broadcaster. The initial legislation covers areas such as: • which country’s laws should apply and in which circumstances rules for advertising, sponsorship and teleshopping covering areas such as discrimination, protection of minors, and rules for products like alcohol, medicines and tobacco • quantitative rules covering the amount and timing of adverts • universal access to major events • q ualitative The revised directive now takes into account new technology and new practices, adding minimum principles for ‘on demand’ content, such as the qualitative rules for advertising, identifying the media service provider and identifying which parts of the content are commercial communications. Key stipulations include: •a maximum of 12 minutes’ advertising an hour news and children’s programmes may be interrupted once for each scheduled period of at least 30 minutes • no advertising or teleshopping during religious services •n otification of product placement, with appropriate consumer information and editorial independence • f ilms, RTL Group 23 Advertising TV & INTERNET More Freedom for Advertisers... “W hat TV shall I catch up on today?” 24 RTL Group The inconvenient truth about TV commercials ...means more choice for Viewers With many more television channels, new platforms for distributing TV content, and more ways to address increasingly specific target groups, digitisation is changing the way people watch TV. What’s more, the opportunities for effective TV advertising have never been greater. Photos: iStockphoto Viewers can watch what they want, when they want, how they want – and that suits today’s busy lifestyles. Actually, it’s leading to an overall increase in TV consumption – though it’s no longer just via the traditional TV set. With video on demand, catch-up TV and mobile TV, people can exercise more choice. For RTL Group, it’s an opportunity to diversify. For our advertisers, it offers a whole host of new ways to speak directly to potential customers. “Ten minutes until the train − just time to watch the news.” RTL Group 25 Advertising So let’s take a look at some of these new opportunities… Catch up with catch-up Online video on demand, or catch-up TV, seems to be viewed over and above scheduled broadcast viewing, which itself is still on the increase. Significantly, it is to the websites of the established broadcasters that people flock when they want to catch a show they missed. Importantly, viewers accept – expect, even – advertising with their catch-up TV. Watching the ads is their part of the deal for getting their favourite shows when and where they want. As a taster of what is possible, M6 Replay, the catch-up TV service of M6 in France, attracts 1.7 million unique visitors a month and offers advertisers 10 to 70-second spots in its programmes, including the interactive option of click-throughs. Incredibly, the rate of clicks on its advertising spots are between 10 and 30 times greater than for classic internet display ads. And first studies also indicate the strong impact of ads on M6 Replay, which offers the highest level of memorisation of advertising messages on the internet. Make the most of double vision If you’ve got teenage kids you’ll know exactly how TV viewing can be increasing while internet use is also on the up. Quite simply, they’re happening at the same time. With broadband penetration rising as quickly as laptop sales, many more people are going for the two-screen experience 26 RTL Group The inconvenient truth about TV commercials Photo: Getty Images “O ne eye on this, one eye on the TV screen − that’s the way I watch today.” – watching TV while using the laptop. Think of the possible scenarios: bet online while watching the match or race; discuss the talent show with friends on Facebook, while you’re watching it; look up more detail on the historical drama or travel show you’re watching; and here’s the big one – see the TV ad, compare prices online, buy the product before the ad break has even finished. It’s happening, right now, in a living room near you. Now TV is on the move With mobile TV, you can tune into your favourite shows or specially made bulletins while you’re out and about. It’s early days for mobile TV advertising, but IP Deutschland has already integrated a L’Oreal men’s cosmetics ad into an N-TV news podcast, which was downloaded 367,000 times − and generally 68 per cent of N-TV news users are men. This is all a new frontier for TV broadcasters and their advertising customers. We’re still learning about how the public responds to adverts on these new formats. But what’s already clear is that viewers accept advertising as an integral part of their viewing experience. And as viewing numbers increase, so will interest from advertisers. So the internet certainly isn’t the final frontier for TV advertising. RTL Group 27 We zapped, we zipped, what next ? What will happen to TV advertising in an age when viewers can not only zap from channel to channel at will, but also zip quickly through ad breaks on their personal video recorders (PVRs)? David Brennan of Thinkbox, the television marketing body for the main UK commercial broadcasters, shared some of his research with us. David often refers to what he likes to call the ‘contract’ between consumers and TV companies: “Consumers have always been surprisingly tolerant of TV advertising,” he says, “they understand that TV offers them great content but it doesn’t come for free. It’s the advertising that makes it possible.” So with the help of David’s research, we thought we’d add a few new clauses to ‘the viewing contract’. 28 RTL Group Contract We, the television company will provide you, the viewer, with news, sport, music, drama, comedy, educational programming, chat shows, talent shows and general entertainment. We will fund this by interspersing this content with commercial breaks. Here are six reasons why we may need to update the contract for the 21st century. 1.I f you choose to watch a TV programme at a time other than its scheduled broadcast, you may still watch the ads at normal speed − nearly half of people still do. 2. E ven though you have new viewing gadgets, you may find advertising has more impact on you − the impact of commercials on homes with a digital television recorder has risen 5 per cent, and average viewing time has risen by 20 minutes a day. 3. Even if you fast forward through the ads (this happens to around 5 per cent of ad breaks in digital recorder homes) you may still take them in, and you may even wish to return to the ad − research shows that people use their video recorder to re-run ads or go back to the ad break. And ads viewed in fast forward are still recalled at around two-thirds of the level as when seen at normal speed. 4. Y ou may zap between channels during a break − it happens 3 per cent of the time – but actually, you may end up seeing more ads as a result. 5. You may scan the electronic programme guide during ad breaks − it happens 2 per cent of the time – but the ads are still on in the background. 6. If you are one of the 85 per cent of viewers who still watch TV at its scheduled broadcast time, you may still, as always, leave the room during the ad break − though this happens only 5 per cent of the time. Sources of information: Thinkbox RTL Group 29 Facts Figures & 30 seconds of airtime during that 2008 Superbowl would have cost you $2.7 million ... 103.7 million people saw the highest-rated commercial minute of all time, for Victoria’s Secret in the 2008 Superbowl. Source: Nielsen, 2008 30 RTL Group Source: CNN ...but if you’d chosen a 1941 baseball game, like watchmaker Bulova did in reportedly the first ever TV ad, you’d have been charged 4 Dollars Source: Bulova ONE THOUSANd days If you watched end-to-end all the TV spots aired in Germany in 2007, you’d be watching for 1,000 days. Enjoy. ************** THE LONGEST COMmERCIAL ever is the Non Stop Fernando ad by Emirates Airlines, at 14 hours and 40 minutes − running for the whole non-stop flight from Dubai to Sao Paolo. Source: Emirates 85 % of Germans, when asked where they could spontaneously recall seeing a recent advertising campaign, replied: “on television”. Source: Forsa, Germany, April 2008 Ninety-Seven per cent of EU households have at least one television set. Free-TV is available in each and every one of these households. Source: ACT, Association of Commercial Television in Europe Spain UK Germany France Italy Total TV advertisers 2008 4,311 3,520 1,733 2,153 1,502 13,219 Photos: Picture-Alliance/DPA (left), iStockphoto The chart below shows the number of different companies advertising on TV in 2008, and the number of different products they promoted, in Europe’s five leading TV markets. TV products 2008 13,517 8,832 6,528 7,930 4,675 41,482 Sources: Spain/Italy: Adex Nielsen; UK/Germany: Nielsen Media Research; France: TNS Media Intelligence RTL Group 31 Advertising Formats are the new creativity Television offers a huge array of new ways to advertise products – and advertisers seem to be showing a real appetite for them. Creative new advertising formats are demonstrating high recall rates, which suits broadcasters and advertisers alike. For the advertiser it means products can really stand out from the crowd and achieve a strong presence, and at a range of budgets, too. Here’s a quick summary of the formats. S ponsorship formats Here, a product or brand is linked to a programme or part of a programme such as the trailer. E vents The advertiser partners the TV company in presenting a special event such as an exhibition, awards ceremony or sporting event, or is linked with TV output relating to a special day such as Mothers’ Day or Valentine’s Day. 32 RTL Group The inconvenient truth about TV commercials P roduct placement A product or logo is used in a show. This is already commonplace in US TV series and movies, while in Europe, new regulations allow product placement, with complex conditions attached. Split screen A commercial spot is broadcast in one part of the screen while the programme is displayed in another. This works well during the transition between programmes and reduces the likelihood of people changing channels. ews countdown N Shortly before the news a split screen is inserted at the end of the commercial break showing the seconds countdown for the start of the news programme. S ingle spot A full screen spot, aired as the only spot during an ad break and supported by a special advertising separator. S pot premiere This is a ‘classic’ spot for the first time on TV with a special advertising separator. C rawl A message, often in text form, running along the lower edge of the screen. Skyscraper An advert that runs through the screen in the form of a column, showing the logo or product itself. RTL Group 33 Advertising RTL Group’s Multinational reach With 45 television channels and 31 radio stations in 11 countries, RTL Group is the leading European entertainment network. Each day, over 200 million viewers all over Europe watch RTL Group’s television channels, which include the families of channels clustered around the flagships RTL Television in Germany, M6 in France, RTL 4 in the Netherlands, RTL-TVI in Belgium, and the young Five family in the UK. The company also has broadcasting operations in Hungary (RTL Klub), Russia (Ren TV), Croatia (RTL Televizija) and Greece (Alpha TV). Our ad sales units work closely with advertisers and agencies to help them gain the best possible value. We offer easy-to-use tools for ad booking, easy access, and − above all − expertise in planning and executing promotions in their respective advertising markets. We also carry out research into the impact of advertising, compiling numerous reports and practical case studies to highlight the power of television and the strength of our channels and format brands. 34 RTL Group The inconvenient truth about TV commercials IP France France +33 1 56 69 40 00 www.ip-france.fr Atres Advertising Spain +34 91 623 05 00 www.atresadvertising.com IP Belgique Belgium +32 2 679 52 11 www.ipb.be Five Sales UK +44 20 7550 5555 http://about.five.tv/sales IP Luxembourg Luxembourg +352 44 70 70 1 www.ipl.lu RTL Nederland The Netherlands +31 35 711 3838 www.rtl.nl R Time Media Hungary +36 1 382-8501 www.r-time.hu RTL Televizija Croatia +385 1 3660 000 www.rtl.hr M6 Publicité France +33 1 41 92 66 66 www.m6pub.fr IP Multimedia Switzerland +41 44 914 92 00 www.ipm.ch IP Network Luxembourg +352 42 142 4721 www.ip-network.com IP Deutschland Germany +49 221 5886 0 www.ip-deutschland.de IP Oesterreich Austria +43 1 367 80 40 www.ip-oesterreich.at Alpha TV Greece +30 212 212 4000 www.alphatv.gr RTL Group 35
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