Networks: Digital Video's Not Biting Into Our Ad Dollars

Advertising on digital video platforms continues to climb. It’s expected to get to over $4 billion in revenues this year. Advertising on traditional TV platforms is also up, albeit with slower growth, to a much bigger $70 billion a year.

Many estimate that traditional TV platforms could lose their dominant share of advertising to digital in a few years. Media agency ZenithOptimedia for example, estimates that TV’s share of worldwide spending will decrease to 39.3% in 2016 after peaking at 40.2% in 2013.

Is this cause for worry from major TV content creators? Not necessarily.

Les Moonves, president/chief executive officer of CBS Corp., has said that much of the new digital video space-- especially “premium” video -- still resides in the hands of the big TV content creators.

For example, around $1 billion of that $4 billion in digital video revenues – or 25% -- goes to the likes of Hulu, whose owners include network parents Disney, Comcast and News Corp. And that’s just one premium digital video platform.

Whatever you think about the networks and where you’ll be watching your evening’s entertainment decades from now, you also need to consider where it all can be marketed. Many still bet that the most powerful media/marketing platform -- TV advertising time -- will be around for some time.

In the future, in addition to touting their own programs, the networks will also be able to include related digital properties in their valuable in-house on-air marketing time.  That will mean more ad time for Hulu and other digital areas and mobile apps.

A couple of years ago, NBC made some impact by giving Hulu a 30-second Super Bowl commercial. More of that might be coming.

Leave aside advertising-supported digital video platforms for a second. What is the highest-profile original TV program on the Internet? Netflix’s “House of Cards,” a series generated from traditional TV-film content creators.

Digital video advertising dollars won’t go just to user-generated or entrepreneurial video websites which won’t take a chance on big productions that cost hundreds of millions of dollars to produce.

That is unless they figure out another formula. Netflix says it has one. It uses fancy algorithms to figure out what its customers like. For “House of Cards,” consumer data showed heavy interest in dramas starring Kevin Spacey as well as in TV and movie content  produced or directed by David Fincher.

So here’s the big question: Can anyone really reinvent the TV network production model on a broad scale -- or are we just destined to watch a string of six-second long Vine videos?

Tags: tv
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