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Courtesy of HRTS Corporate Partner PricewaterhouseCoopers.
By Ron Cushey, (ronald.cushey@us.pwc.com).
One of the most interesting stories on television this year won’t appear on any one network or hit show, but in our homes and among the growing array of devices that help us all lead and enjoy our modern, connected lives. As the fall television season gets underway, the impact of DVRs and other emerging technologies are top-of-mind for content producers, advertisers, studios and cable networks. Consumer media habits are rapidly evolving, challenging the business models that have shaped television for decades. The year ahead should provide some noteworthy insights into what comes next.
Web Video Arrives
With home broadband adoption accelerating, turning to the Internet for content isn’t just for teenagers and technophiles anymore. Arguably the biggest breakout star of recent months didn’t make her debut on television or in a blockbuster summer film. Two-year-old Pearl, the pint-sized star of funnyordie.com’s infamous “Landlord” skit has seen her work rack up 45 million hits on the web and been translated into seven languages—compelling numbers for any medium.
For television, the Internet offers attractive and diverse marketing opportunities, especially for new shows trying to find and build an audience. Pilot episodes and clips abound online, eagerly posted by marketing teams. Additional online tie-ins from character blogs to bonus scenes can further energize a show’s fan base.
With the recent news that web video leader YouTube is finally taking the plunge into advertising, Internet-based content is competing more directly than ever with traditional television—both for eyeballs and advertising revenue. But the old adage still applies: “If you can’t beat ‘em, join ‘em.” With LonelyGirl15 landing a regular spot on ABC Family’s “Greek” and MySpace favorite Tila Tequila headed to MTV, the Internet continues to emerge as a vital promotional extension and growing farm team for traditional television.
DVR Impact Just Getting Started
PricewaterhouseCoopers recently completed a global survey of the media habits of more than 7,000 of our employees in 17 countries. It confirms that DVR adoption is rapidly growing, particularly among prized advertising demographics. Among young, tech-savvy early adopters, global DVR use stands at nearly 25%.
While DVRs are the most frequently used time-shifting technologies, found in 1 in 5 US homes today, on-demand viewing options also are growing at a healthy clip. Comcast’s on-demand service attracts 250 million views each month, and cable companies are experimenting with various advertising models there.
The bottom line is well-known to those of us in the business today: Consumers no longer depend on location, device or program air times. They enjoy their content when and where they want, and future generations of viewers will grow up with this new reality as their status quo expectation of the medium. They will have no recollection of any time when consumers were not in control. This is the going-forward reference point for emerging business models.
Content Remains King
Already 2007 has seen the arrival of live + 7 as well as commercial ratings that help all parties gain greater insights into evolving consumer behavior—and how advertising and other content monetization strategies can keep pace.
One early lesson of consumer DVR usage is heartening news to television writers: Ratings that account for DVR viewing tend to bolster scripted television’s numbers most, led by popular serials ranging from “CSI” to “Heroes” to “Lost.” Summer’s record showing for original cable programming, which gained market share against a reality-heavy broadcast slate, reinforces a strong appetite for diverse, original programming. And, don’t assume it’s an older crowd staying home and tuning in during the balmier months. Last summer, among the coveted 18-49 demo, cable outdrew broadcast by a 2:1 margin.
Commercial ratings also hint at a silver lining. Nielsen unveiled its new system in June. Initial findings indicate many viewers do watch ads. DVR owners, on average, watch about 2/3 of them. Some ad viewing is the result of watching programs in real time. But about 40% of ads that could be skipped are still viewed.
Ask consumers which ads they watch, and relevant ads rank at the top of the list. TiVo analysis recently revealed that the most watched ads on their devices weren’t funny or glamorous, but straightforward pitches for CORT furniture rental. Add entertaining, particularly humor, into the equation (consumers most often cite Geico’s quick-witted talking lizard) and consumers also stay tuned. Another category they frequently brake for? Ads for more content, of course.
Consumers Still Favor “Free”
PricewaterhouseCoopers ongoing conversations with consumers indicate a continued heavy preference for free, ad-supported content—the traditional television model. How do you keep consumers who can no longer be held captive? You give them a compelling reason to stick around.
The graduation of Geico’s cavemen from 30-second spots to a 30-minute sitcom is hardly the only experimentation underway. Expect a wide array of exploration that further blurs the lines between advertising and entertainment—far beyond simple product placement—from breaking up the length and placement of ads within a program to more creative efforts to engage the consumers’ interest.
One interesting early example is American Eagle Outfitters’ innovative back-to-school “advertainment” programming that airs in the opening commercial pod for MTV’s “The Real World.” Directed by Milo Ventimiglia (better known as Peter Petrelli to “Heroes” fans), these “It’s a Mall World” shorts explore the lives of teens working in a local shopping mall (fashionably attired in American Eagle clothes, of course). You can check out the clothes and get more content online.
On the Internet, as well, new advertising models are emerging that respect shifting consumer boundaries and expectations. YouTube recently announced its first foray into advertising, working with select content partners who will share revenue. After watching 70% of viewers abandon content that began with traditional pre-roll advertisements, the web video leader opted instead for a semi-transparent ad that appears at the bottom of the viewing screen for up to 10 seconds. Viewers can click it away, pause the video and watch the ad or ignore it altogether—maintaining control and instant access to their content at all times.
These are smart evolutions. Consumers are well aware of their new tech-enabled freedoms and quick to exercise control with a few quick clicks of the mouse or remote. Successful advertising strategies need to take this fact into account.
What’s Next?
Television remains central both to American culture and the business of entertainment. Today’s viewers are watching just as much television—just not as many commercials. The challenge is identifying the business models that best support and complement the content we love. Likely answers will lie in strategies that forge a stronger, more entertaining and relevant connection with today’s empowered consumer. Will a Holy Grail emerge in 2008 or a whole array of diverse possibilities for advertisers? Time will tell. Either way, it’s an interesting time to be in the business. So set that TiVo and stay tuned.
Ron Cushey is a Director in the Entertainment, Media and Communications practice of PricewaterhouseCoopers (ronald.cushey@us.pwc.com).
About the Outlook
PricewaterhouseCoopers’ Global Entertainment and Media Outlook: 2007–2011, the eighth annual edition, contains in-depth analyses and forecasts of 14 major industry segments across five regions of the globe – the United States, EMEA (Europe, Middle East, Africa), Asia Pacific, Latin America, and Canada – plus a Global Overview. To learn more about the Outlook please visit, http://www.pwc.com/outlook.
The Outlook also includes in-depth global analyses and five-year market forecasts for six other industry segments, including: book publishing, business information, magazine publishing, newspaper publishing, recorded music and theme parks and amusement parks.
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