Special thanks to my friend and colleague Caroline Murphy for contributing to this article.
2014 will mark the first year in history that TV advertising is soft, even though the industry overall is still growing at robust pace. Industry observers and practitioners will finally have a chance to say “I knew it!” and will predict that within the next two or three years a seismic shift of advertising spend from TV to digital will have happened. Yet, they might be just as wrong as they have been for the last decade, as the demise of TV which many have thought inevitable it hasn’t quite happened yet. In APAC, TV remains the largest media category with 41% of total advertising spend, and growing by 5.5% in 2014. TV might not be the future, but it is still certainly the present.
So is TV really going to die? The truth is more likely that the current and future nature of television is more complex than we have allowed or given credit for.
A step back: inability to predict adaptation
When we look at trends, we often underestimate the ability of industry players to adapt themselves and morph their business model to follow their customers and find new avenues to growth and profitability. A couple of examples:
- Just a couple of years ago, Programmatic buying was believed to be suited mostly to performance advertisers, given the perceived trade-off between buying efficiencies and brand association. Today, with the emergence and phenomenal growth of PMPs (Private MarketPlaces), brand advertisers are taking massive advantage of programmatic buying in a very effective way
- The Facebook IPO was largely considered a secular flop, as many analysts believed that Facebook had been unable to monetize mobile ads effectively, exactly when its user base was flocking towards mobile. Today, Facebook is largely mobile-first in all its efforts, and the shift to mobile is seen as its biggest opportunity
TV is certainly going through a number of challenges. TV ratings are steadily declining; the explosion of premium content available is leading viewers away from linear TV watching, while young audiences (the most coveted by advertisers) are flocking to digital and especially mobile. Ads are not viewed on DVRs, no matter what studies from Nielsen say, and advertisers don’t really believe in C3 or C7. Forcing viewers to watch ads can’t be the right answer for brands trying to build more meaningful connections, and permission-based advertising is the new paradigm.
So is this the end of TV? Or is it just the wake-up call which TV needed to accelerate the pace of change and morph into a new form of media that people will be attracted to?
Embracing the new video landscape
TV is already changing. While many of us in the tech world have been racing to advance our entertainment offering, we neglected to see that the old dog had indeed learned some new tricks. For example, TV players have understood that leveraging social media to drive buzz around a show can persuade more people to tune in, hence they are investing more in highly social shows and live programming (e.g. reality, sports).
But the biggest trend that TV is gearing up for is how audiences consume content, from a variety of sources and platforms, utilizing catch-up TV as well as appointment-based watching and engaging in these actions in non-traditional ways and at all times, always demanding full control. Content consumption today is anytime, anywhere, and this is where some of the most interesting TV innovations focus on.
Broadcast replication: enables consumers to view their linear broadcast content on devices outside of the home. Sky Television in the UK has a strong product offering for its subscribers providing them with the option to watch their favorite show wherever they are by logging in online using their unique subscriber ID.
Advertising parity: Up until recently broadcasters were extremely limited in monetizing VOD (Video On Demand). Ads were traditionally baked into the content at the time of encoding, meaning that if the user watched the video a year after, he would see the same ad that was originally embedded. With new technological advancements by companies like BlackArrow it is now possible for broadcasters to insert ads dynamically, creating a monetization model that exists and operates correctly in order for broadcasters to finally make this operation profitable. This also means that OTT players can better support consumers’ trend of ‘Binge Watching’, creating catch up services online as well as extending the programme experience through behind the scenes and deleted footage.
Content delivery optimization: Smart TV’s and Smartphones will soon be equipped to learn a viewers habits and deliver a customized programming schedule that matches their preferences. The traditional television guide will evolve to resemble something like the iTunes library where viewers will face a list of recommended published content accessible on demand through a myriad of channels including web, broadcast, apps etc. In this way the traditional television model will look more like a curator of content and audiences rather than the box in the corner of the room.
Original content production: It would be a mistake to assign Netflix, Yahoo Screen and Amazon the titles of original content producers only, networks have been doing this since the advent of TV but without doubt they have been taking greater risks on their investments because of the wins to be gained in live and follow up programme viewing. ITV’s global darling ‘Downton Abbey’ costs this station a cool $1.5million per episode and the debut episode of HBO’s Boardwalk Empire cost $20million alone.
The next TV
So where is TV headed? Rob Norman, Group M’s Chief Digital Officer, recently made the following predictions on what media will look like in 2016:
- Will be over the top – disconnected from schedules
- Responsive – its form will respond to devices and their capabilities
- Intelligent with some form of personalization
- Chapterized and skippable
- Traded programmatically
- Will be short form
- Stream or feed based
- Created by a much much broader production ecosystem
- Perhaps half of long form media consumption will be ad free
- Will retain huge audiences
- Some, but almost no media outside of live sport and events, will retain significant simultaneous audiences
- These media will trade at massive premium to the market
- Will still be bundled but cable subs as we know them may have fallen by between 25 and 50%
The key question is, in which of the three buckets above will TV fall? So far, the TV ecosystem has been slow at adapting to consumer and industry trends. Will 2015 mark a turning point?