• by July 12, 2004

REM crooned "It's the end of the world as we know it and I feel fine." The 80s band wasn't talking about TV.

But two marketing consultants speaking at the AD:Tech-Chicago trade show on Monday were, and issued a wakeup call to marketers, agencies and interactive tech vendors proclaiming 2006 "The End of Television as We Know It." They say the economics of the TV business are unlikely to be "fine" if networks, cable operators, advertisers and agencies don't figure out how to deal with ad-skipping, on-going media fragmentation, and declining primetime TV viewership.

In 2006, analysts project that digital television will be in more than half of all households, along with video-on-demand. Digital Video Recorders, and set-top boxes with DVR functions, are expected to reach 20 percent household penetration rates, as control over programming choices, viewership, and advertising, shifts to consumers. Geoffrey Meredith, president, Lifestage Matrix Marketing, told listeners gathered in the session "2006: The End of Television as We Know It," that primetime will disappear and that advertising will shift to a "commercial choice business model" where "advertising on demand" is the order of the day.

The days of network programmers in control are waning. "Digitization changes everything," Meredith said, adding that the 200-channel universe and DVRs also wipe out the idea of appointment viewing. Interestingly, he cited research that finds 20 percent of adults ages 25-54 aren't home from work by 9 p.m. to 10 p.m. and they spend 80 hours away from home weekly.

"We are in an always-on economy," said Joyce Schwarz, CEO of JCOM, a marketing consultancy that works with early-stage interactive technology companies. Schwartz coined the term "eplex," referring to the emergence of end-to-end electronic entertainment and the rise of wireless home networks powered by servers.

Meredith cited research indicating that when consumers have the opportunity to skip ads, 71 percent of them choose to do so. Product placement and branded entertainment programs have helped marketers find ways around ad-skipping but they are only "bandaids on a broken model," he noted. Set-top boxes are ideal for targeting addressable ads and for implementing advertising-on-demand because each box is uniquely addressable. Meredith noted that ads can be targeted to individual households by zip codes, income levels, and demographics. He showed an example of addressable advertising in an offer from the Bermuda Tourist Board that targeted 65-year-old men and women who like golf.

Creative challenges come along with improved targeting. For example, if consumers are so accustomed to skipping ads, how will they know whether they want to watch an ad, particularly one that's targeted to them? Meredith said "speed bumps" are a technology that allows an ad to play at a normal speed even when the consumer has fast forwarded through it. A speed bump can also telescope or segue to a long-form ad within a program. Such ads can be tagged with a call to action, or flagged with an icon.

"We're moving to a world where you have to think outside the pod," Meredith said. "All of this is happening sooner than you think ... We're moving to a commercial choice model." The model looks something like this: Each program will cost a viewer 'X' number of credits; viewers earn credits to watch TV. So, for example, a two-credit program is sponsored by Johnson & Johnson. If a consumer chooses to watch the show, he or she must watch a certain number of ads, or if the viewer decides not to watch the ads, the show's credits are added to a monthly TV bill. The economics of the arrangement are such that advertisers pay only for those ads viewed, a recipe for turning the broadcast networks' upfront model on its head. The self-targeting, or self-selecting ad model is line with the rise of consumer control.

Meredith and Schwarz eventually see a nearly complete integration of TV and the Internet, particularly as the broadband Web enables more and more video. Schwarz said TV and the Internet have fueled the rise of the "3rd, 4th and 5th screens"-wireless/handheld devices, downloaded content to own via the Internet, and electronic signage in public spaces, elevators and billboards.