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.
We’ve seen the future of the second screen and it’s all about the data. Data is going to be the currency that fuels the entertainment industry in the years ahead and second screen will be the way that data is collected.
Think of how readily we give up personal information to search engines or to join social media sites. So why wouldn’t we give it up for something we really value: great entertainment?
The industry has always held the ultimate consumer attraction — great stories, great stars, great sound — all of which have the power to draw unlimited audiences on a global scale for hours on end. What information would you give up about yourself if it was the only way to watch the Super Bowl? What would you give to get the final episode of your favorite series first? When you think of the data you give up to maintain virtual friendships with people you haven’t seen since fourth grade, you’ll understand the potential value of giving up that same data to have access to entertainment.
That’s why we’re convinced that the media and entertainment industry is in an amazing position to prosper in a future world where the real currency will be the data we are able to collect about our customers. The second screen is not about the screen. It’s about connecting the content company to their customer so they can learn more about them.
Enabled by their fundamental interactivity, these second screen mobile devices will be the single, most popular way viewers will (literally) touch their programming, while paying for the experience with marketable information about their viewing, social and shopping habits and preferences.
Without a second screen component, broadcast, cable and even streaming are going to be (virtually) unplugged; they will continue struggling to sell advertisers who are challenging their numbers based on outdated measurement tools.
Once granted access to their customers data via second screen devices, however, those content delivery networks will hold the key to the largest untapped, demographic treasure trove in history; the data about who watches what, when and where will provide them and their business partners with accurate and irrefutable data, and measurable ROI.
The second screen will be the ultimate destination in today’s smart entertainment supply chain. By completing this connection, content creators and owners will have a real-time feedback loop that will enhance both business and creative decisions. It will put the content owner and their advertisers in direct contact with their consumers for the very first time. It will enable content marketing to come from the most authentic of sources — the fans themselves.
Audience measurement and analysis will become even more accurate and fast. And a new media and entertainment monetization engine will emerge, generating more profits, more productions, and more creative experimentation than ever before.
This post originally ran on the 2nd Screen Society web site and reflects our new thinking around the meaning and value of 2nd Screen. You can see it in action at the 2nd Screen Summit at CES, Monday, January 5th at the Encore. Tickets available now.
Seven years ago, I wrote a piece called “Your Brand Is Not My Friend” that talked to the fact that there are only a handful of brands “cool” enough that people actively seek them out on social media. The other 99% of brands have to provide something of value to get people to pay attention to them.
What makes a Prom King Brand? It is, as the saying goes, a certain je ne sais quoi, but the easiest definition is a brand whose logo people will unironically wear on a cap or a t-shirt. So Nike. Starbucks. Apple. Plus sports teams. Colleges. Musicians. And of course, TV shows.
There’s a certain cool factor to TV shows that most brands just don’t have. So that people will engage with their accounts on social media and play around with their second screen apps. It’s not a little off for an adult to admit to being a fan of Homeland (especially this season) and therein lies the opportunity for brands to introduce an alternative to interruptive advertising (those 30 seconds commercials that have become increasingly jarring the more we rely on services like Netflix and Amazon that don’t have them.)
A branded promotion around a TV show— and that could be everything from sponsoring a companion app that allows viewers to play along with a show like The Voice, your basic Twitter promotion contest during the season premiere or an full in-show integration the way Dodge did with Defiance— will get traction from fans of the show and the brand will gather the halo effect of being associated with a Prom King brand. It’s a way to get consumers to pay attention and think good thoughts about your brand. When executed correctly, it’s also a way to get them interested in learning more about your product, either because it’s the prize for the competition or because you’ve positioned it in a way that makes them understand the connection between your brand and the show and why you’ve got something they might be interested in.
As second screen grows, along with the rich (and measurable) data that comes with it about who the viewers and fans are and what they’re doing online, it will become more of an integral part of the show’s production, with showrunners and their staff creating experiences that feel organic to the show. That means networks will begin working more closely with advertisers to create unique properties for them, something that harkens back to the early days of television when brands worked closely with showrunners and networks.
I’m not sure interruptive advertising will ever totally go away. But for brand looking to stay on its customers good side, branded second screen experiences should provide a viable alternative.
One of the great cultural shifts of the 2010s, one that has gone fairly unremarked upon, is the ascendence of video as our media of choice.
Not for entertainment— that’s old hat— but for everything else, things that were usually written: directions on how to tie a bow tie. News stories. How-to guides. Even opinion pieces. You can see it in the search results when you have a technical question or want to learn something more about a current topic: there’s just a lot more video being produced.
The reason I’m calling it a cultural shift is that we consume video in a very different way than we consume text and that makes big difference in how we process information. You can’t quickly scan a video for the data you want. You can’t really multitask either, at least not if you’re planning on full comprehension.
Now it’s entirely possible that the above is just an old school way of thinking, written by someone who still has an easier time editing a 10 page document if it’s printed out and that a generation raised on video will have no trouble processing and shortcutting videos, that multitasking while watching will be as easy for them as multitasking while typing is for me.
Video requires two of the five senses while text only requires one. From a practical matter, that means I can’t be watching a video and having a conversation at the same time. It also means that I’ve got to either be in a room by myself or have headphones on so that I can hear the video. So stealth is not an option the way it is with text, I can’t sneak peaks at a video while I’m in a meeting the way I can with an online newspaper article.
Video is also a visual medium with a whole language of close-ups and cuts and pull-backs that doesn't exist in print. Learning that language, becoming fluent in how to create, understand and interpret in it, will eventually change the way our brains process information. When information is transmitted by video rather than text, when children grow up watching rather than reading— that’s going to be a very different world from our own, just in the way people think and imagine and perceive.
On a long-term basis, it’s hard to predict what effects those changes will have. Rather than visualizing words (think of one of those ubiquitous tag clouds) we’ll be visualizing moving images. So will we become less detail oriented? More focused on the big picture? It’s hard to predict what the ultimate change will be, but in a world that’s awash in too much information, video may be prove the ideal medium precisely because it forces us to stop and focus on what we’re seeing, what we’re learning, what we’re feeling.
Something that’s sorely missing from today’s always distracted, smartphone-centric culture.
1. While mobile video viewing is definitely booming, remember that many of the numbers you see also include at-home viewing over the home WiFi network. Which is very different than out-of-home viewing over an LTE network. (And the stats are rarely split to show the difference between the two.)
2. The reason more people watch video on their smartphones than on their tablets is that more people have smartphones than tablets. So raw number-wise, the smartphones are always going to come out on top.
Stats are great and all, but it's always important to maintain a degree of skepticism as to how they were collected. Self-reporting in particular always troubles me, as people tend to self-report the behavior they want to have, not the behavior the actually have.
Last night, The Wall Street Journal confirmed what many of us had already suspected: that HBO has no intention of actually selling its new streaming service itself, but rather, is planning to outsource that function to either the MVPDs, who'll sell it as part of their broadband service or to device manufacturers like Roku, who’ll sell it as an add-on service.
Either way, HBO is not going to get its hands dirty with things like customer service and bill collection.
On the surface, the new OTT service should be a gold mine: HBO can price it below the cost of a monthly subscription through the MVPDs while structuring the deals to ensure they get a larger share of the revenue. They’re powerful enough now to do that.
Or are they? Because there’s a not-all-that-unlikely scenario that has HBO losing money on their shiny new streaming HBO On The Go service.
That scenario plays out like this: while the MVPDs have made it really difficult to pull out of your HBO package, the new OTT service will be attractive enough to get a lot of customers to pull the plug on the MVPDs and switch over.
And once they’re there, they’ll realize something many of us figured out fifteen years ago, back in the Sopranos days: there isn’t a whole lot of reason to subscribe to HBO for 12 months a year. Unlike Netflix, HBO doesn’t have a huge back catalog of content. They’ve got some pretty good movies, but so do Amazon and iTunes and at least theirs are first run. So a lot of people aren’t going to see the need to keep on spending ten or twelve dollars a month once they’ve seen the latest season of Game of Thrones. And thanks to binge viewing, that may take them all of three weeks.
And the thing is, it’s going to be really easy to unsubscribe from a Roku or Xbox type standalone service. Navigate to the web site, click a few boxes and you’re out.
Compare that to unsubscribing from HBO on your MVPDs service and you’ll see why I’m concerned. To begin with, the MPVDs have structured their offerings around the notions of different “levels” of service. So if you have the Titanium level package, you get the fastest internet speeds and all of the premium channels (HBO, Showtime, Cinemax, etc.) Remove a piece from that titanium stack and the deal collapses and your monthly price goes way up. And since you’re not really sure how much of the hundred plus dollars a month you pay your MVPD actually goes towards getting you HBO, the impulse had been to just leave it alone, not to mess with the package.
But if the streaming service starts to look too good to pass up, a lot of people are going to decide to put up with the hassle of pulling out of the MVPDs program. And those formerly full time subscribers may quickly turn into part time ones.
HBO should be worried precisely because it’s going to be so easy to subscribe and unsubscribe. The MVPDs and their byzantine policies gave them a fairly stable customer base. But HBO wanted to give consumers choice, and choice is great and all that. Until someone decides to use their choice against you.
So today FCC Chairman Tom Wheeler came out with a widely praised announcement that for purposes of access to TV content, internet-based providers are now to be accorded the same respect as terrestrial and satellite based ones.
His blog post (yes, the FCC has a blog) starts out with a memorable call to arms "Consumers have long complained about how their cable service forces them to buy channels they never watch" and then continues to lay out all the reasons why internet based companies should be granted the same access to programming that cable, telco and satellite companies now have. Wheeler cites the 1992 Congressional ruling that forced networks to give access to satellite providers and correctly points out the correlation between satellite pay TV providers in the early 90s and OTT pay TV providers in the mid-10s.
Which is all well and good, but....
(And it's a really big but...)
While all the usual suspects are running around proclaiming the second coming of the New Era of Television (the first happened a few weeks ago with the HBO and CBS announcements)-- they, and Wheeler, are forgetting one crucial thing: the existing cable and telco companies own the internet. Or at least broadband access to it. What's more they pretty much have a monopoly, or at best, a duopoly, on it as their territories rarely, if ever, overlap.
This is actually as big a problem as it sounds. And it some point someone is going to have to (a) acknowledge it and (b) deal with it.
Right now, thanks to Chairman Wheeler, I can go out and buy up the rights to broadcast an array of network television programming over the internet. I can sell you packages as big or as small as I like. But in order to get them from my servers to your TV set, we've got to go through enemy territory.
Because there's nothing in any of these rulings preventing Comcast or Charter or FIOS or Uverse or Cox from charging customers who don't use their pay TV service all sorts of exorbitant rates for data usage. It's a pretty easy package to put together: Get AcmeCo's Gold Package: 50 Mps Broadband plus 800 TV channels with no data cap! The flip side of which is: Get AcmeCo's internet only package, the one without pay TV and you'll be staring at giant sized data overages... especially if you sign up with one of those internet-only pay TV providers.
The scripts for the commercials to scare consumers away from those internet pay TV companies and their hidden fees sort of write themselves, as do the direct mail pieces and robocalls.
The solution, it would seem, is a fairly painful one: break up the broadband monopoly the way we broke up Ma Bell back in the '80s. It's a political football no one is going to want to get behind though, fraught as it is with images of tinpot dictators nationalizing large swaths of their economies and leaving the country bankrupt as they flee to Switzerland with their shoe-addicted mistresses.
Plan B would be much stricter regulation of the sort that's particularly hard to write without creating endless loopholes, but which would ensure that broadband providers could not penalize consumers for choosing an alternative pay TV provider.
Here again, it will be a while before that legislation is written, even longer till it's approved, which is why I am not holding my breath for a successful over the top TV service launch next year.
Until we address the fact that broadband access in the US is a monopoly-- and all that entails-- our pay TV options are going to remain more or less as limited as they are today.