Dec 15, 2014

TV's Accountability Issue

There were two interesting take-aways from the TV of Tomorrow show last week, that are somewhat interrelated. The first was that as viewing shifts away from linear to DVR, VOD and OTT, brands should hesitate to pour all their money into linear television advertising that doesn’t get seen. The second is that Netflix is eating into the networks viewership. It’s not that people are watching less of the programs the studios and networks produce. It’s that they’re watching more of it on Netflix.

Where, of course, they watch without commercials.

There are a few threads going with the way advertising is handled. The first is plain old measurement: why are we still relying on Nielsen diaries when it’s quite possible to know what every single set top box is tuned to at any given moment. That kind of reliable metric is currently available for digital media and since it’s feasible for television too, TPTB are starting to demand accountability.

Accountability matters because the lion’s share of ad budgets are still going into linear television. Which is quibble #2: Why? Why, when NBC’s head of research, Alan Wurtzel, opened the conference with a slide that showed linear viewing has slid to around 60% while noting that DVR Playback is not only largest primetime “network,” it’s four times larger than the other four major broadcast networks combined. (Given that Wurtzel’s stats constitute an admission against interest for NBC, I’ll take him at his word.) 

Despite the fervent wishes of both the networks and the advertising agencies that sell those commercials, no one is watching commercials on their DVRs. They’re just not. So you have accountability times two: why are we guessing at who is watching TV advertising and why are we pretending that they’re even watching it at all, C3 and C7 be damned. Which translates into more than a few CEOs asking “and why exactly am I paying for this?”

To which their CMOs are unable to come up with a compelling answer. 

It's important too, to ask why the idea of watching TV without commercials suddenly seems so appealing? Beyond the fact that most most commercials suck, that is. Well, Netflix has trained some 50 million of us to enjoy television without commercials. And it’s not all Orange Is The New Black. In fact, most of it is network programming. You see back in the day, networks had to wait until a show hit 100 episodes (usually sometime during season 5) in order to put a show into syndication. So seasons two, three and four just sat on the shelf, losing money. At least that was the pitch Netflix gave to the networks and studios who all happily gave up those recent seasons to Netflix for gobs of money. Then they got addicted to those gobs of money and even convinced themselves that Netflix was driving viewers to watch shows live because, you know, Breaking Bad.

Only now it’s become clear that Netflix is actually siphoning viewers away from live TV, in no small part because they can watch shows on Netflix without commercials. And having gotten used to those gobs of money, the networks are finding it very difficult to break their Netflix addiction. That addiction has many negative effects, not the least of which is that the commercials that do get shown on linear TV will go down in price because fewer people are watching them, and the delta between money lost from ad revenue and money gained from Netflix revenue is not moving in the networks favor.

Now if you’re thinking that just means brands need to shift their dollars from linear to digital video, think again: study after study keeps coming out about massive fraud and wasted dollars in that segment, so buying digital video is no panacea either.

Another fine mess we’ve gotten ourselves into.

The key is going to be figuring out what replaces interruptive advertising. There was a lot of talk about buying audiences rather than just viewers. But that's only a partial solution, a band-aid at most, because once you introduce people to the joys of ad-free TV, you can’t expect them to still watch 8 minutes of advertising for every 22 minutes of programming again, no matter how relevant those ads are.

I don’t know what the solution is: I’m not that smart. (And if I did know it, I certainly wouldn't be giving it away in this post.)

But it’s a problem. One the industry can’t just wish away.

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