Do not adjust your sets. The revolution under way in television could cause unexpected interference this year.
Let us accept for a moment the contention of cable and satellite television companies that cord-cutting, the spectre of consumers unplugging cables and disconnecting dishes, has not (yet) led to the exodus of subscribers that some analysts feared.
A digitally-savvy minority is certainly working round monthly subscriptions by using internet-connected sets, the 2.8m Apple TV boxes sold last year, Netflix streaming, iTunes and Amazon downloads, Family Guy episodes on Hulu, shared YouTube clips and shows on broadcasters’ websites. But they are still far outnumbered by traditional couch potatoes.
Media buyers have been struck by the enduring power of television, which is growing more quickly than any advertising medium except digital. MagnaGlobal this week predicted that US TV ad spending would be up 6.8 per cent this year.
Television bulls have their annual moment of vindication coming with the Super Bowl on February 5, which this year could draw a record audience, there in part to watch advertisements sold for 17 per cent more than last year’s average price.
The last two Super Bowls were the most watched programmes in US TV history, with the audience hitting 111m in 2011, and spending on national TV sports advertising jumped from $10.3bn to $10.9bn in the year to September, Nielsen reports. Whatever happened to audience fragmentation?
The answer is that, beyond sports, live events such as the Oscars and reality TV shows, fragmentation is starting to upset TV economics, and the likes of Apple, Netflix and YouTube are absolutely to blame.
Digital video services may not be eating into most consumers’ spending on traditional pay-TV services – enough seem willing to pay extra for on-demand video or libraries of old hits – but the surge in new video options is eating into the time they have to watch TV.
In mid 2011, Nielsen reported that the average American had found another 22 minutes in his or her month for television over the previous year. But it also found that the heaviest internet video users were suddenly watching less traditional television than average. These early adopters are likely to be advertisers’ most sought-after viewers.
The digital distractions will increase this year. Connected TVs presented at the Consumer Electronics Show this month will make online video easier to access, and Google this week boasted that YouTube now gets 4bn views a day, up 25 per cent in just eight months, even before its strategy to showcase more professional video bears fruit.
Netflix, Richard Greenfield of BTIG wrote recently, serves up 2bn hours of video to all its users every three months, enough to rival the 15th most watched US network. “It simply cannot be all incremental,” he said.
In the fourth quarter of 2011, Michael Nathanson of Nomura has noted, live primetime viewing fell almost 5 per cent, the 13th quarter in a row of decline.
Most of that was made up when looking at media buyers’ currency of “C+3”ratings, which measure people catching up with shows on digital video recorders during the three days after the broadcast. But C+3 does not catch ardent viewers watching last week’s missed episode, or streaming older seasons stripped of ads.
John Rose, head of Boston Consulting Group’s media practice, says “No one is capturing it. There’s no systematic measurement vehicle for non-linear television”.
Viewing averages conceal large behavioural shifts among some groups – again, usually advertisers’ prime targets. He adds: “People in the US who own a tablet watch 50 hours of long-form video on their tablet a month. It’s a staggering number.”
Advertisers and media companies are reaching for alternative ways of measuring audiences. NM Incite, a company formed by Nielsen and McKinsey, scours social media to find correlations between online buzz and TV ratings.
This week, Time Warner invested $12m in Bluefin Labs, a “social TV analytics” company that gives clients detailed demographic portraits of the audience commenting online as well as telling them how shows and ads are being received.
Mr Rose says:“The thing I worry about is that the video value chain is a very complex and inherently frail set of economic relationships”.
Relationships that had changed little in decades “are about to be disrupted, and that will shift massive amounts of value to different players”.
Producers of premium “must see” television – especially live sports – are thriving, as is niche content that once struggled to find an audience, Mr Rose says, but “the stuff in the middle dies.” As more video is watched outside traditional advertising windows, marketers will need to become more creative.
It would be rash to write off the couch potato, often willing to stick with one network’s evening line-up rather than change channel.
But the viewing behaviour of advertisers’ most coveted audiences has changed and that change is accelerating.
Brands will need new means of reaching them, and new ways of measuring their viewing. Stay tuned.