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Tuesday, May 15, 2012

Surely, TV is ruined?


In 1776, Adam Smith published his magnificent economic treatise A WEALTH OF NATIONS. It was a defining moment for classical economics and the free market.  A few years later, one of his past students, Sir John Sinclair, reported to Dr. Smith about the success of the colonists in the American Revolution. “Surely”, he wrote, “if we are on at this rate, the nation must be ruined.” Smith answered the letter as follows: “Be assured, my young friend, that there is a great deal of ruin in a nation.”  His meaning was that despite political bungling it takes a lot to bring a nation down.

I think that the same thing can be said about the TV medium. About a dozen years ago, I spoke at a conference and talked about how TiVo was going to change things in TV in a big way. No one was upset as penetration was in the low single digits at that time. I remember saying that DVR’s (Time Shifting Devices such as TiVo) would lead to greater commercial avoidance and that when DVR penetration hit 40%, TV would cease to be the powerful advertising medium that it had been for 50 years.  Even the TV folks in the audience applauded so I repeated my fearless forecast at events over the next few years and never received any push back.

Well. As we write DVR penetration is at 41% of US TV households according to Nielsen and other forecasters claim that it is in the 43-44% range.  And commercial avoidance is rampant. Study after study continues to find that not only are viewers skipping many commercials on playback but also people are multi-tasking so much with laptops and Smartphones that many TV commercials are being missed. And, any honest agency person who really analyzes clients sales will tell you that it takes more rating points, sometimes far more, than it did several years ago to move the sales needle.

Yet, this week, the network upfront market is about to explode in New York as each of the major players gives its new season presentations. While few are expecting the 12% uptick in sales that the networks had last year over the previous year, most reliable sources are betting on a high single digit year over year increase which is very good given a domestic economy with only 2% GDP growth and worries about European banks and that continent’s fragile economy (the upfront marketplace is where major network advertisers place approximately 85-92% of commercial dollars. It happens in a two-week cavalry charge in late spring each year. Old network hands say that they sell for two weeks a year and move inventory around the rest of the time. Inventory not sold in the upfront is sold in the scatter market at higher prices than the upfront and a small allocation goes to opportunistic or last minute buys at often very favorable rates).

While all this is going on, Dish Network is introducing Auto Hop, a service that will allow subscribers to automatically skip commercials on many if not most primetime programs.  Not a death blow, for sure, but it is clearly another way that network TV commercials lose some more of their effectiveness.

So, what is going on? To me, it remains the same as it has been for the past several years. Increasingly, major advertisers are using more social media and experimenting with mobile. But, national network TV is their security blanket. Package goods have crossed the Rubicon and now spend more on promotion that conventional advertising. In many categories, however, network TV and increasingly national cable TV remain the backbone of their media efforts.  And, the networks have done a great job of mining new categories for TV spending.

If you had asked most media analysts five years ago how long the network upfront could last, many would have said 3-5 years. Now, it looks as if it could be 5-7 more years regardless of the extent of commercial avoidance.

Measurement metrics for all new media are improving and some very rapidly. That has to raise the confidence level of marketers over the next few years in reallocating their media dollars.

So, is TV ruined as the dominant advertising medium? Long term, as commercial avoidance grows, it has to be but to paraphrase the great Adam Smith, “there is a lot of ruin in the TV medium”. Stay tuned, my friends. I will.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com


2 comments:

  1. I wouldn’t say that TV is ruined, and the new Auto Hop feature doesn’t delete or remove any of the commercials. This feature simply lets the user decide if you want to skip commercials or not a day after PrimeTime shows have recorded. The commercials will always be there if you want to watch them, Auto hop just does the fast-forwarding for you. I was thrilled when a couple of my coworkers at Dish told me about its function, and not having to manually fast forward any more. This will ease the burden of having to replace my remote batteries often.

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    1. My point is simply that even if only a few thousand people use Auto Hop on a playback of a program, it will be one more chink in advertiser supported TV's armor. Commercial avoidance keeps growing almost relentlessly and this is one more small step in that direction.

      Thanks for your interest in Media Realism.
      Don

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