Commentary
How Unbundling Content And Audience Will Negatively Impact Advertisers
- by John Piccone , October 24, 2014
While reading his post, I was struck by the similarities between content bundling for consumers and advertising bundling practices that exist today in linear TV. For years the two have been joined at the hip, and it is dangerous to ignore the profound impact any dismantling of the current content bundle will have on advertisers’ fundamental use of TV: mass awareness and consideration for their products and services.
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For decades, TV buyers and sellers have bought and sold TV advertising by placing premium (and expensive) content at the center of the bullseye of value. The value proposition of attracting the masses through entertaining content and inserting one or more advertiser messages had a dramatic impact on advertisers’ sales, broadly speaking (or else they would not have come back).
Over the years, the dynamic of content attracting audiences and those audiences being sought by advertisers grew to the point where more content (and distribution) was needed to satisfy both content and advertiser demand. In the sky and underground, satellites and cables delivered more and more diverse programming to more and more Americans. It came with a cost, but not at a level where the value and choice of entertainment was not worth it. And whether audiences realized it or not, this cost went back into creating more content that, in some cases, is proving to be so good that one could argue it is having an impact on theatrical sales. But this is a subject for another day.
Of course, nothing happens in a vacuum. Due to the amount of choice available, audiences began to fragment. As a result, advertisers could no longer accumulate the masses as easily as they once could on broadcast networks only. To re-aggregate audiences, sellers of both cable and broadcast began to bundle programming that attracted similar audiences and thereby, with delivery guarantees, satisfied increasing advertiser demand. And so the flywheel goes: more programming = more audiences = more advertisers = more sales for advertisers = more revenue for TV sellers.
So now that there’s a renewed attack on the cable bundle, let’s not forget that this also attacks the audience bundle. With the audience bundle that advertisers have relied upon to sell their products in jeopardy, advertisers also face an attack on their business.
We cannot forget the plain and simple truths about TV. First, it is the only platform that aggregates all of America. Second, if you want Americans to consider your product (search for it online), they usually need to hear about it on TV. And lastly, from a media efficiency perspective, advertisers only pay for the target audience reached. The non-target audience reach is free. That’s a pricing model that no other medium can match.
Advertising on television will continue to optimize organically. Buyers and sellers will invest in distinct capabilities that support mass reach objectives such as addressability, localized delivery, tighter audience targeting -- and now, if defined correctly, programmatic tactics. But the core advertising principles of broad awareness and consideration that TV uniquely delivers cannot be forgotten. And today’s content and advertising bundling are the most efficient means to that end.
Traditional linear TV is woefully behind on the technology curve and in a competitive/fragmented OTT video on demand landscape, woefully overpriced. The napster effect has taken hold. Young audiences expect free and find the streams online, for free. The internet does aggregate all of America, more so through mobile. Folks do consider search more after various platforms on the internet and mobile than TV. Digital advertising is exactly paying for audiences reached. PayTV bundles secured by government rules that support retransmission fees and carriage rights are antiquated and are actually a unnecessary cost borne by consumers. Free markets will distill the content most favored by consumers according to the viewer habits. Business models do change.
John, really important that you have pointed this out. Mr. Zachary has some valid points but aggregating audiences without regard to content/context is still problematic in my mind.
Ultimately, the cable bundle is simply a more cost efficient means for most consumers to acquire the high quality content they want. How many $6.99 or $8.99 monthly fees does it take until it costs as much as the bundle? I don't believe the majority of consumers will save money this way.
The point here: Customers pay for say 75 channels and maybe watches 20. The customer must pay for the channels he never watches as each channel charges the cable company/satellite company a fee per each viewer and that fee is getting higher each year. The customer is tired of this monopoly of paying for all those selling channels that charge high prices for junk (mostly) and also pays a fee for the channel because it is all bundled in the monthly fee he pays. Break the terrible TV bundling monopoly now!
Neil - I agree that context will always play a valuable role but fewer programs command the needed volume of viewers to satisfy an advertiser's reach needs. As a result, bundling targeted audiences will be needed to fill in the ratings gaps and support contextual strategies moving forward.
Leonard, I agree the business models are constantly changing and the consumer is at the wheel of change. However the digital advertising model still needs major improvements such as eliminating the fraudulent and robotic activity that according to IAB is roughly 36% of all Internet activity. Television and Internet advertising will always work hand in hand to satisfy distinct marketing objectives and even more so now that better data is coming to Television.
John, excellent article. Yes change is afoot. And yes, the current model delivers. The fun is predicting where is all this going and that is what makes the sector somewhat analogous to Class 5 rapids. All the technological advances that enable change; high speed internet access at decreasing cost / bit; HD qualify viewing devices at decreasing price / performance; portability; RTB; programmatic; dynamic value exchange engagement advertising; privacy ..... all stir the pot on what, without question will be an every increasing consumer driven and controlled experience; at least, that is how I see it. And to that end and Joe Marchese points out, could very well cost the consumer more for what they wish to consume. Ah, but here is where I diverge a bit. I believe that there is value in giving consumer's control over their consumptive ad and content experience rather than being controlled. "Pull" rather than being "Pushed." This is perhaps a not-so-subtile but often ignored point. Its the old saying, "We sell satisfaction and not just product or service." In my opinion, there is hidden value there to be mined. It's why Apple is Apple. Great product and great satisfaction. Point is, give the consumer what they want, and by George, the majority might actually pay more for it. My vote is that a sizable and growing number of consumers want control over their viewing experience; advertising and content. They have been waiting for that. And I encourage that both advertisers and content creators and purveyor embrace the change with the consumer in mind. HBO and CBS are moving to test. If we don't pay attention and deliver to consumers satisfaction through quality products and experiences, video content runs the risk of being "Napsterized." Yes ... yes I know that the video content business is an order of magnitude or more larger than music; certainly on the cost side. And the there are huge barriers for something like that to happen to say the least, criminality. However, I would argue that lurking in the shadows here, deep in the caldron of rapidly advancing technology and entrepreneurs, could very well be a disruptive business model that surfaces that none of us see right now. So grab your paddles. Tighten life vests. I think that is a water-fall coming.
I can't believe the shortage in vision writers are demonstrating (first Joe and now John). I mean no insult, since anyone on any field/segment can face the same. Just take in mind the changes that are happening all around the world (not just inside the US) and you could understand the HBO / CBS strategy. V.gr., here, at México, the analogous TV will be history on 2015, meaning that all existing TVs on 2016 will be smart or capable to receive digital transmissions. These devices (the smart-TV) are capable to establish internet connection via WiFi, HDMI, Bluetooth and, very important, DNLA, which means there's no need for the typical antenna, the decoder, the TV-Decoder-Control and the decoder-card (have you already seen the 'economy of scales' implied?). And, yet, you, as an user, can see any program on your smartphone or desktop pc... and that's only the tipping point.