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MDI is currently in production on TV Dimensions 2021, scheduled to be released this January, and therefore we have been taking a closer look at the current state of cable TV. Based on our findings, we’ve encountered many misapprehensions about this form of TV that should be addressed.
Most importantly, cable is hardly in its death throes. Cable is doing OK right now, if by cable, you mean the cable systems and satellite distributors. Perhaps it’s not great, but it’s hardly bad enough to go into panic mode, and most basic cable channels continue to make solid profits. Just because a lot of people—mainly moderate to lighter viewers who want to save some bucks per month—have "cut the cord," this doesn't mean that everybody will do the same. Forty years ago, people said that the broadcast TV networks were doomed. Twenty years ago, they said that the introduction of DVRs meant the end of commercial TV. Five years ago, it was claimed that "TV" was finished and all the "eyeballs" were moving to digital. Of course, nothing as dire as these predictions actually happened. What we are witnessing is another natural readjustment as more and more program content players, program distribution mechanisms and new business plans replace old ones or cause incumbent players to modify their ways. "Cable" is simply one of the bigger players and it, too, will adjust.
Looking to the future, despite the inroads of streaming services on time spent viewing, as well as outright cord cutting, we think that "pay TV" will level off at about 50-60 million subscribers in about 4-5 years. While it’s possible that the over-commercialization of so many basic cable channels is a factor that might cause us to lower our estimates, it is also likely that the cable channels (as well as the broadcast TV networks and stations) will come to understand that there are limits to commercial clutter that may not be tolerated. Even lesser educated heavy viewers of all ages and old folks who rely on pay TV for companionship as well as entertainment and news, have their limits. That said, if 50-60 million homes continue to subscribe, even if this is way down from the penetration levels prevailing ten years ago, pay TV will still be quite a profitable venue, provided certain adjustments are made. For example, the cable systems and satellite distributors will have to develop more flexible bundles and to do this they will need to stop funding many of the more selective cable channels with carriage fees. This, in turn, will cause most of these channels to disappear (or become digital-only venues), which will have the effect of greatly reducing the remaining bundles. The resulting pared down bundles would be more palatable because they would include all the biggies—ABC, CBS, NBC, ESPN, CNN, FNC, etc.—and fewer niche channels of limited appeal. This will occur even as the TV establishment continues to build momentum with various combinations of SVOD and AVOD services. As has happened time and again with the medium as a whole, cable will still be around, simply transformed to reflect the changing tastes of consumers, as well as the technology available to them.
A recent commentary in MediaPost (“Working Vs. Non-Working Budgets: Outdated Metric”) suggested that the “old” model of using TV ads as the starting—and focal—point of campaign development is now passé. In this scenario, the media department basically works out the numbers for a TV buy, plus some other media as dictated by the client's past preferences. But now, with a myriad of digital approaches and direct marketing options for agencies to develop, TV is no longer the force it once was.
We say, not so fast, at least if we are focused on major national branding ad campaigns as opposed to the often equally large sales promotional efforts by those same advertisers. The latter include direct response/search as well as many other types of promotional activities, which, as a rule, are not handled by the agency people that work on the branding part of the equation. In fact, specialist shops often get these assignments, or they are in-house operations. So it does seem as if TV commercials are not the major focus of advertisers when one combines all types of advertising.
But what if we went back in time and combined sales promotion with branding? Then too, we would see that TV was far from dominant, with large amounts of money being spent on direct mail solicitations, coupon drops, all sorts of promotional ploys, etc. As a rule, these non-TV budgets were under the control of the client's sales people working in coordination with brand managers. However, on the branding side it was clear that the ball game was being played almost entirely in TV and the primary thrust at the agency and client marketing levels was on brand positioning and creative execution.
This brings us to the current situation. Bearing in mind that there are always exceptions, very few media people at the agencies work on both the branding and sales promotional aspects. Indeed, even within these two types, many specialists handle specific duties. On the branding side, TV is still the heavy hitter, with the top talent (and attention) given to this medium; it’s hard to imagine the level of industry interest or enthusiasm being lavished on one of a thousand online ads that comprise the bulk of advertising as a whole.