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It is now clear that “linear TV” is evolving and its audience is becoming fragmented, not only because there are more channels to choose from, but also because of the multitude of platforms on which to view broadcast/cable TV programs. Original programming on SVOD services like Netflix are further distractions and DVRs continue to provide delayed viewing that allow viewers to easily skip the ads in the shows they record. All this raises concerns among advertisers about whether their favorite—and often primary—communications platform is still able to effectively target consumers. Advertisers also wonder, “Is linear TV losing its reach? Will we be obliged to switch most of our linear TV ad dollars to digital? And how will we know if digital ads work or how to evaluate them?”
Capitalizing on these perfectly valid concerns, digital ad sellers, buying services, and theorists who look down on television have waged a campaign to promote the idea that linear TV is dying, which simply isn’t true. Nevertheless, they claim that advertisers’ only hope for future promotional success is to embrace digital media as their primary ad medium. But they also contradict themselves, claiming that linear TV can be saved if “audience” and programmatic buying systems are adopted before it’s too late.
The push to “reform” TV time buying (“reinvent” might be a better term) has been led by the promoters of digital’s programmatic platforms. The programmatic sellers have promised the moon to get attention, “undreamed of” targeting efficiencies, the ability to cross TV’s “arbitrary” daypart and network type boundaries and, of course, to depart from the “stupid” practice of targeting 18-49s or 25-54s in TV buys. TV advertisers and agencies have taken notice, but after a closer look, what they found was that the systems have no way to deal with media planning issues like reach, which is why brands divide their TV buys by dayparts and network type segments in the first place. There is also no way to include qualitative factors.
This is not to say that everything’s just fine for linear TV and digital media is not a burgeoning alternative. Linear TV’s ratings continue to be fragmented, its reach capabilities among younger adults are impaired, CPMs keep rising, and there is heightened ad clutter as sellers try to compensate for lower ratings by adding commercials. Furthermore, commercials are easier than ever to avoid, due the use of DVRs and the distractions of smartphones and other electronic sources. The structure of linear TV’s content distribution system is also in flux. Cord cutting is on the rise, even if not to the degree that some digital enthusiasts claim. Approximately 14% of U.S. TV homes do not have access to cable fare via traditional cable or satellite systems, and many cord cutters have cancelled their subscriptions to pay TV only in the past few years. In addition, about 5% of the country’s households can access video content only via broadband.
Seizing upon a perceived opportunity, a number of media entities—from both the linear TV and digital camps—have offered consumers low cost skinny bundles, featuring far fewer channels at much lower prices than are charged for cable system/satellite distribution packages. TV/movie producers are also offering their own streaming content subscriptions, and some are planning to withhold their content from rival SVOD services like Netflix. As consumers are offered more of these options, it is likely that cable system subscriptions will continue to decline, but the impact of this cord cutting on the reach of TV advertising is not easy to predict. If the broadcast TV networks and their owned cable channels gain traction in the streaming arena, they will bring their ads with them, in effect replacing lost linear TV GRPs with streaming GRPs. Also, with fewer channels available to a typical cord cutting, streaming service consumer, average minute tune-in rates for the broadcast/cable channels that can be seen in such households should increase, creating what would amount to reverse rating fragmentation. If this happens, linear ad seller ratings will begin to rise nationally, thereby making traditional TV more attractive to advertisers and boosting ad revenues. At the same time, linear TV content providers may also garner significant digital subscriber fee windfalls that might further increase their bottom lines.
Questions also remain regarding the way TV time is bought and sold, especially involving the entrenched upfront corporate buying system and age/sex audience targeting. When upfront time buying began decades ago, it was solely an ABC, CBS and NBC affair, and it accounted for about 50-55% of their primetime ad revenues. Advertisers launched the corporate buying system, pooling their brands into a single buying entity to intimidate the sellers, and in some cases to obtain better pricing terms in exchange for high dollar volume deals. As the years passed, the networks saw that they could use the upfront to control the GRP marketplace, particularly as more and more advertisers began to participate in the upfront and as rival sellers—cable channels, alternative broadcast networks, like Fox, and national syndicators—began to compete for a share of national TV ad revenues. Eventually, the networks, which now included Fox and the CW, were selling 70-75% of their primetime GRPs in the upfront, along with time in other dayparts, while the cable channels moved upwards of 65% of their inventory in the same manner.
Several initiatives have been in development to better target TV buys. One of these, “addressable TV,” purports to eliminate “waste” audiences. The problem is that, except for the rare instances where the advertiser supplies the addresses of known customers or prospects, the actual buys are based on profiling, not on specific information for a given home, and the audience metric is set usage, without knowing who in the household is viewing. In addition, the national GRP inventory is very limited for addressable TV sales, and many homes still cannot be reached in this manner.
Another refinement, which is also profile-based, enables a brand to specify its target in fairly precise detail, and in a granular fashion where geography is a critical variable. Using “big data” set-top box panel ratings, the household audiences of each of the seller’s shows are matched with the target profile, creating an index that is used in conjunction with Nielsen ratings to create a marketing-driven currency for more tailored buys. NBC, Fox, Turner and Viacom have offered such refinements to certain advertisers, but the problem again is the fact that profiling is based on set usage, not viewing metrics, which favors the seller to a great degree. In addition, only a single seller is involved in most cases, meaning that the buyer can’t evaluate alternatives from other vendors.
If better targeting is to be accomplished, and this means not only zeroing in on product buyers or likely brand users, but also on mindsets that are compatible with the ads’ positioning and execution, then the only way to do it is on a brand-by-brand basis. And movement on this front is limited at this point.
In any event, these are our thoughts as TV heads into 2018, 68 years after its first big rush of commercial success in 1950. Much has been accomplished—and learned—and much needs to be done to adapt to the new and emerging realities of a digital world, with its attendant fragmentation of viewer options. Clearly, linear TV can’t stand still; new business plans and programming concepts are developing rapidly than realized, and more and more advertisers are waking up to the fact that they need to rethink their traditional approach to the use of television, particularly how they buy time and target audiences. Hopefully, the effects of these re-evaluations will become evident in 2018. It should be an interesting year.
TV Dimensions 2018 will be released this January. It is currently available for pre-order—save $200 off the cover price when you order by January 15th. Visit our website for complete details, including a complete editorial outline, updates to this year’s edition, and an exciting new research service upgrade.