These days we hear a lot from Washington about the need for adult conversations. Sometimes, the topic is Social Security, Medicaid/Medicare, the budget deficit, or the ongoing wars in Iraq and Afghanistan. To date, with few exceptions, I have yet to see much in the way of what I would categorize as an “adult conversation.”
Today, Media Realism is going to attempt to have such a discussion on the current state and future of television as an advertising medium in this country. The issue is multi-faceted and complex. Lots of people discuss one part of it but few try to look at it as a whole. Hence this post.
Basically, I see the following as key issues interwoven into the discussion:
1) Commercial avoidance
2) Free TV vs. Paid TV
3) Copy Lengths
4) The Future of TV in a digital world
1) Commercial Avoidance—this is the big one that does not get nearly as much attention as it truly merits. In December, we “crossed the Rubicon” where it now appears that 40% of American households have a DVR (time shifting device). This is a bombshell issue that I referred to as “The Elephant is All Our Offices” (see Media Realism, January 6, 2009). If people are taping shows, the odds are overwhelming that they are zipping through commercial breaks when they re-play them. Some studies indicate that the majority of DVR owners dutifully watch the whole two minute commercial break during playback. C’mon, get real.
Nielsen now provides primetime numbers based on live telecast plus three days and live telecast plus seven days. And, many top rated shows are heavily taped and re-played later. For a few decades, top rated shows have always been premium priced relative to lower rated fare on a cost per rating point basis. Now, with 40% of homes owning a DVR, I would be careful not to chase programming that is taped heavily. The premium that you pay may be much higher than you realize. Also, as the average rating of all programs have declined, is it worth it to pay a 200% premium for a show on a cost per eyeball basis? When programs delivered a 20-30 rating, absolutely. Today, however, the top rated shows do not deliver the unduplicated reach that they once did. On top of that, maybe 70% or more of the audience is deleting your commercials when they play it back.
I have monitored this closely for years. It is not just the DVR that has increased commercial avoidance. While remotes have been around since the late 1950’s, people became grazers across the landscape during commercial breaks when they had 100 plus cable channels or satellite options. Now, people hit a dozen channels or more during a break. During football and basketball season, millions watch two or three games at once as they surf for action during breaks. What I have noticed and can quantify is a direct correlation between DVR penetration and TV performance. Ten years ago, a four week TV buy for an established brand with 1100 rating points behind it could deliver a fairly predictable bump in sales. With each passing year, using the same daypart mix, you needed more weight to trigger sales to move up. Now, in many categories, that 1100 point buy of 2000 needs 1500 points in the brave new world of the 2010- 2011 season. Yes, there are other factors such as competition and a weak economy but target persons simply not seeing your commercials is a large part of it. And, it will only get worse with each passing year as DVR penetration rises and TV options grow.
2) Free TV vs. Paid TV—the press still harps on those people who “ditch the dish” or “cut the cable cord.” They brag about how they get by with rabbit ears or an antenna. Others often have no TV but rather rely on some combination of Netflix, Hulu, You Tube, a Roku Box, Apple, Amazon, or Crackle. After spending a lot of time researching this, most of these people tend to be young, very well educated types who lead hyper active lives. They are technically quite sophisticated and have no problem searching for 2-3 minutes to find something to watch. In an earlier post, I have mentioned that cable had an ace in the whole with sports. If you love sports, you need cable to get your weekly fix. Well, a few young readers angrily notified me that with P2P streams, they get all the sports that they want for free (do you know what P2P is? Better check it out).
My best estimate is that the number of domiciles giving up cable or satellite totally is about 70,000 households per month. If the trend grows to let’s say 200,000 per month, watch for some swift action by cable and satellite providers.
All of this raises an issue that I still have trouble understanding. Every day I continue to be amazed at how much is available online. Weeks can go by when all my series viewing is done via Netflix or Hulu.com. With Hulu, I may see 40% of the commercial load that I would see if I watched a program live. When will the networks and cable players, who are the content kings, start to block their programming to certain on line entities? I noticed with great interest that the major networks are not allowing Google TV to carry much of their programming. Clearly, Google could buy anyone out with their free cash flow. So, they fear Google. Yet, a danger does exist with these smaller players that continue to chip away at the advertiser supported audience. Every person who watches something on Netflix or something smaller and more exotic, hurts commercial TV and cable. As we look back years from now, part of TV’s decline may be death by a thousand small cuts.
By 2013, SNL Kagan projects that 46.3% of U.S. households will have at least one TV with a broadband connection and some 7% will depend on the web instead of some form of pay TV. That is only two years away!
3) Copy lengths—TV spots are getting shorter. Today, some 34% of the commercial load is 15 second commercials. With DVR activity plus the inevitable itchy trigger figure on the remote, fewer commercials are getting seen. I know of three professionals, whom I do not think know each other, who are running lots of five second commercials. The issue is simple for one—“if I run more spots, period, I have a better chance of being seen. And, if people are channel hopping, they may see my entire message.” Another pro says that, to him, TV spots are video billboards so five second announcements work really well. They all use TV successfully but they seem to be adapting more imaginatively than most to the developing trend of commercial avoidance. Interestingly, one is about 30, the second 50, and the third around 70 years old. Being smart spans all generations! Also, this trend would tend to really favor established brands and retailers where TV advertising can be used as a reminder. A new player needs longer copy to establish who they are to consumers.
4) TV Potential—20 years ago, everyone was buzzing about the potential of interactive TV. You would watch a political debate and phone in your preference or buy a product on-line immediately. More of this is coming and it will make TV far more dynamic medium that it is now. For example, sports fans will be able to connect with fellow zealots in real time across the country. This could be a great tie-in with mobile advertising and far more interesting than Twitter. Cable has lots of new products in the pipeline and Google TV should be able to provide some remarkably granular data on audience attentiveness that will be invaluable to advertisers going forward.
Does TV still work as ad medium? Of course it does! Not as well as it once did given fragmentation and new technology but it is still, for the moment, king. The average household now has access to 130 channels. No one watches them all but most Americans like TV and they REALLY like their current viewing habits. With an aging population, many will never “cut the cord” or “ditch the dish.” They are content with the status quo.
TV is still very much viable. Dismiss as nonsense those who say that they are going 100% digital in a year or two. Unless they have a boutique product, sales will tank and they will be jobless. At the same time, realize what is going on with television advertising and more importantly, the speed of it all. We are not in “revolution now” mode. The evolution, however, is steady and relentless and each of us needs to shift gears each year as the new reality unfolds.
If you would like to contact Don Cole directly, you may reach him at firstname.lastname@example.org