Future of TV ads?

For years I would come home after work and throw on the TV to relax a bit. The show itself did not matter much. I was generally watching shows on TV since it was readily available in any room, easy to access and provided entertainment. Plus I was accustomed to watching news, sports and shows through television sources. Simply put, I’ve never had a reason to deviate from the status quo in terms of utilizing cable providers to fill the digital screens.

Ever look at your Comcast bill and think to yourself that the costs aren’t worth what is being provided and that calling the customer center is hopeless? Thanks to a confluence of events, insights and a rapidly changing technological landscape, there is a viable solution to this problem in the form of streaming media services. I had been aware of servicers like Netflix and in fact subscribed to the service but little did I know there was a whole world streaming outside of Netflix, suitable for home TV viewing. There are numerous outlets for users to access information and media from the internet which I am familiar with (phones, tablets, laptops, computers, video game consoles, other internet enabled devices) and come to find out there are also many mechanisms for obtaining favorite shows and movies (Apple TV, Roku, Google Chrome, Hulu, Amazon Prime, Xbox, etc). Almost all major network providers now have apps that can be viewed with the internet. Armed with this information, it seems logical that people would begin to discontinue their cable provider services and focus on the internet component of their services. Benefiting from the development of new apps and streaming platforms, we are no longer limited to traditional viewing outlets. Is any of this new or undiscovered? Certainly not, if anything I may have been late to this revelation. Recent data suggests that many others may have found an alternative to cable television. According to a March 2015 article by The Wall Street Journal, the Cable Television Advertising Bureau says it estimates that 40% third and fourth quarter (2014) TV-Ratings declines can be attributed to streaming subscription services [1].

So what does all this have to do with marketing? Think about the last time you watched an hour and half long show or movie on cable TV…how long did it take to finish? It was probably nearly 3 hours long because every 20 minutes there are blocks of advertisements and commercials! Companies are willing to pay cable providers large sums of money to promote their product or services through TV ads since it reaches millions of Americans. Marketing departments of those companies spend time and effort devising plans to best execute their marketing strategies, with TV ads likely a large component. If cable TV ratings continue to decline with the exodus to streaming services, how will or better yet, how are marketing teams altering their strategies? The following quote from Sanford C. Berstein analyst Todd Juenger summarizes the challenge for marketers, “We believe the U.S. television industry is entering a period of prolonged structural decline, caused by a migration of viewers from ad-supported platforms to non-ad-supported or less-ad-supported platforms” [2].

Faced with this pressing issue, how will marketers react and cope with the changes? I’m sure there has been discussions occurring across executive teams and marketing departments to find solutions. If more and more Americans prefer on demand video streaming that does not currently support advertising, it’s likely that there is some lobbying underway to change the landscape. I would foresee more and more ads to appear on streaming services, at the detriment of its customers. The streaming service providers offered a model that is cost effective and convenient for users, all while cutting out the ads. As streaming services move closer to a tipping point, the vendors of these products will develop greater leverage in terms of customer retention. It’s at this point I think the streaming providers will begin to insert adds for revenue. I’m already beginning to see advertisements in new and innovative spaces within the less ad supported platform architectures. The free subscription service providers (Pandora, Spotify, Yahoo Fantasy, Zynga, etc) need the advertisement revenue to survive so it makes sense to see mandatory advertisements but will a new norm begin to develop for paid subscription services where the amount of ads fluctuates with price points? Currently “premium” versions generally allow users to avoid ads but will it stay that way for long? Whatever the future holds for industry, one thing we know is that marketing teams will try to stay ahead of the trends and stand ready to adjust to customer preferences.

 

References:

[1] and [2] http://www.wsj.com/articles/streaming-services-hammer-cable-tv-ratings-1426042713

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