Advanced Television

TV Ads: New game, new rules

February 19, 2015

According to Larry Gerbrandt, the habits of ‘millennial’ viewers in the US are causing broadcasters to re-evaluate business models.

The viewing data has been piling up for months, but has turned into a potentially apocalyptic trend line: according to Nielsen viewing data, traditional TV viewing has dropped 10.6% between September and January among the 18-34 demographic so highly coveted by advertisers.

This isn’t a short-term trend either. The drop-off in viewing of traditional TV among these viewers has been going on since 2012 and tracks with the growth of SVoD services such as Netflix and Amazon Prime along with an intense focus on episodic TV series by premium channels HBO, Showtime and Starz.

The shift in viewing is visible among both broadcast and basic cable networks. It also presents a real conundrum that touches every quadrant of the TV business. The conundrum is that millennial viewers are flocking to alternatives that don’t carry advertising and they also programme shows in ways fundamentally different than linear channels. Netflix, for instance, offers the entire ‘season’ of a series on the première night, which promotes the increasingly popular practice of binge viewing. The millennials, raised in homes with DVRs and set-top boxes that could access VoD offerings by networks such as HBO and Showtime, had already developed a taste for the guilty pleasure of watching an entire season of show over a long weekend and doing so largely without commercial interruptions.

Herein lies the conundrum. Millennials are not watching less television—indeed the data suggests overall television usage is up significantly—but are increasingly shifting it from ad-supported platforms to commercial-free subscription supported services beyond the reach of traditional advertising messaging. For the ad-supported networks, faced with increasingly higher programming costs, the alternatives are not particularly palatable to either viewer or advertising.

One is to increase advertising inventory. Through the use of editing and time compression, some cable networks are now up to more than 17 minutes of commercials per hour, a trend which encourages viewers to record programmes to DVRs and fast-forward commercials later on. Ad-skipping is doubly injurious because it not only makes sponsor messages less effective but it also negatively impacts the ability of a network to promotes its own new programmes.

The other is to raise cost-per-thousand ad rates to offset the viewer erosion. Advertisers are reacting by shifting a greater portion of their budgets to the emerging platforms, especially YouTube and Facebook or to a growing number of OTT channels (over 1,500 are now available on platforms such as Roku, Google’s Chromecast and Amazon’s Firestick).

US broadcasters operate under federal licenses with fairly stringent content restrictions regarding language, sex and violence. Ad-supported cable channels, especially those carried on basic tiers, often adhere to fairly conservative self-imposed restrictions, especially during early evening hours.

Premium channels such as HBO and Showtime and the OTT offerings from Netflix and Amazon don’t suffer from the same handicap and for a millennial generation exposed to graphic Internet porn and to increasingly violent video games, the broadcasters increasingly come across as being written and edited for their parents, the ageing baby boomers.

So what are the alternatives? It is unlikely the broadcasters and ad-supported basic channels can win back the disaffected millennials with programming changes, though prime time content is getting edgier and increasingly graphic. One alternative is through the asset portfolio approach: own multiple classes of programming outlets and follow the viewer through M&A. The classic example is Comcast, with ownership stakes in cable systems, broadcast networks (NBC), a piece of Hulu, multiple basic networks and the Universal studio and theme parks.

The best fix may come in evolving the advertising model, partly by making it more programmatic but mostly by fundamentally rethinking how the messages are told. One of the most talked about and boldest move came during the recent Grammy Awards broadcast, when big box retailer Target bought out an entire four-minute commercial pod to air what appeared to be a live performance by Imagine Dragons at the telecast. The catch: the full retail version of the album was available exclusively at Target.

Marshall McCluhan wrote in Understanding Media in 1964 that: “’The medium is the message’ because it is the medium that shapes and controls the scale and form of human association and action.”’ Add a commercial that is nearly indistinguishable from the message and inextricably intertwined with it and it begins to control human action as well.


Categories: Advertising, Blogs, Third Party