How's this for a business model? Give consumers more of what they don't want and less of what they do want.
Over the years, that's essentially what the TV industry's been up to. Networks crammed more and more commercial breaks into shows while cutting back on actual program time so they could fit in all the ads.
Strangely enough, it seemed to work — for a while. Because more commercials meant more inventory, and more inventory meant more revenue. That's basic math, right?
Yes, really basic math. Too basic. Math that can be seductive when everything's going great — like when a network's got a hot show that every major marketer wants in on — but ignores other factors that figure into the more nuanced calculus of the overall television ecosystem.
One of those factors is something every dairy farmer already knows: It's a bad idea to over-milk the cash cow. (Economists know this, too. If you arbitrarily decide to print more money, you just end up devaluing your currency.)
Another factor: Maybe the cash cow wanders off in search of a less annoying field in which to graze—because it's sick of being over-milked.
Of course, that's exactly what's happened. Ad-supported television viewership keeps declining as consumers gravitate to new entertainment options that don't bombard them with interruptive advertising. Like Netflix, which now accounts for 37.1% of downstream internet traffic during primetime hours.
And to throw gas on the fire, Ad Age just reported that the use of video pre-roll ads dramatically increases the adoption of ad-blockers among consumers.
This is not just bad news for media companies. The rub for marketers is that once consumers escape to an all-you-can-eat field like Netflix, they become even less receptive to ads. As NPR recently reported, citing research conducted at the University of Maryland and Emory University, “Viewers who binge watch are less engaged with ads than viewers who watch TV shows periodically.”
Add in the “Empire” Effect — the fact that Fox decided to experiment, just over a year ago, with a reduced commercial load during the first season of its break-out hit, and it worked so well they did it again for the second season — and suddenly the TV industry's got a new mantra: Less is more!
The idea that you can add revenue by subtracting ads is a broad calculation that's going on right now at TNT. "We have overstuffed the bird,” TNT and TBS President Kevin Reilly said onstage at the Television Critics Association confab in reference to commercial loads. And so he's doing something about it: Three of TNT's new dramas will have their commercials reduced by half, to just eight or nine minutes per hour.
A similar initiative has been going down at truTV, which has been out in the marketplace offering advertisers a slate of shows with just 10 or 11 minutes of ad time per hour.
As a TV viewer, I'm happy about that. I hope and expect that other networks will follow suit.
But as a business person I don't think this will succeed in the long run to either increase revenue or attract new customers. Instead, networks need to innovate the kinds of ad products they're offering to advertisers, particularly in the mobile and streaming video ecosystem.
At Watchwith, we've been focused on new non-interruptive “in-program” ad products to activate the most valuable real estate in television — digital overlay within the program content itself. Innovation-minded partners including NBCU, Fox, Mondelez and GroupM have joined us in exploring the possibilities, and so far the results across a broad range of effectiveness metrics, including brand recall and net promoter scores, have been, frankly, awesome.
But regardless of the specific way forward, we think one thing is clear: It turns out consumers don't hate ad messages so much if you don't insist on pulling them away from what they're watching.
So, fewer ads? Good idea.
But a new class of premium digital inventory? Now we're talking.
Zane Vella is the CEO and founder of Watchwith. You can reach him at zane@watchwith.com.
