Commentary

More Money For TV Companies Despite Commercial Skipping

by Wayne Friedman , Staff Writer, February 4, 2014

Will I need to start talking to my TV -- to help out my remote?

“Turn to Food Network’s ‘Iron Chef,’” I might say, “and make it without commercials, please.”

At a Super Bowl party, I explained to some younger people how the sound had been turned off on the host’s TV set.

“There is this key to the right of the volume control. It’s called ‘mute,’” I said. A couple of the party-goers seemed baffled. It’s old-school commercial-skipping, I said, even if it’s just the audio.

Meanwhile, Walt Disney is close to striking a deal with Dish Network concerning AutoHop -- the feature of the satellite distributor’s Hopper set-top-box device that permits mass skipping of prime-time commercials on Disney’s ABC and the other three major networks.

The settlement could mean higher monthly fees for Disney so that Dish can continue to let viewers use the commercial-skipping feature. Other big media companies are still in litigation.

Separately, broadcast networks have been asking pay-TV providers to compensate them for their programming in a manner similar to what cable networks receive.

CBS will soon be getting over $1 per sub monthly from Time Warner Cable. But it got that deal through old-school leverage: making Time Warner cry for mercy in a month-long battle. Did Time Warner really want to tell its customers they wouldn’t see new fall season programs and NFL football games?

On its end, Time Warner got hit two ways: higher fees to CBS, and a loss of more than 300,000 video customers.

Dish presents a different hurdle, but not one that networks figure to overcome. With consumers wanting all options to see programming, TV technology never stops. But consumers also understand the reason for commercials, even as they try to avoid them.

Well into their second decade, DVR set-top boxes that permit time-shifting are still in only 50% of U.S. TV homes, with slow growth. Why? Is growing on-demand usage through traditional TV platforms, as well as online video viewing, taking over?

Since VOD and premium online video platforms don’t allow commercial skipping, will networks continue to worry about commercial skipping in the future?

Should viewers want commercial-free programming, they will be able to get it through standard DVR machines, services like iTunes, and other means.

I’m just waiting for the day when a network says in an on-air promo that viewers have the option to watch a program with or without commercials.

19 comments about "More Money For TV Companies Despite Commercial Skipping".

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Michael Natale from MCM Media Sales, February 4, 2014 at 3:38 p.m.
50% DVR penetration, but in the the more coveted affluent homes the penetration is much higher and they have most of the spending power so that number on it's own is misleading. By the way, have you heard the expression "sitting is the new smoking"....sitting around all day (especially sitting through needless tv commercials during primetime viewing when you can skip them, or use Netflix etc) is so unhealthy and a waste of precious time. Get up and move around and for God's sake don't sit for 3 hours of television at night when you can record your programs, skip the annoying ads during playback (which all jumped the shark in the Superbowl BTW), watch them in 2 hours and spend that hour that you will NEVER GET BACK doing something productive. Paying more for each year for less ratings on TV is not a good business model.
Reply

Doug Garnett from Protonik, LLC, February 4, 2014 at 4:29 p.m.

It's all interesting in light of the studies the clearly show that TV advertising impact has increased since the advent of DVR's - not decreased. There are some good reasons for this and it makes sense once we abandon the superficial thinking ad agencies adopted at the advent of DVRs. It's always made me wonder why ad agencies were so desperate to kill off TV against their best interest. Another version of agency self-loathing?... http://dsgarnett.wordpress.com/2011/03/02/more-research-shows-dvrs-e-g-tivo-increase-advertising-impact/

Michael Natale from MCM Media Sales, February 4, 2014 at 4:39 p.m.

Coming from a Direct Marketer who is protecting his own interests I would have expected nothing more so I get the "studies have shown" bit, but where are said studies and who performed them? Let me guess self interest groups like Nielsen who must protect their money making turf. If more people skip ads then ever before (bc of all the various devices and fragmentation etc) then how could TV advertising have a greater impact? That makes NO sense and isn't even possible....Plus there are so many great programming options to choose from without annoying time suck ads (Netflix,HBO and Showtime to name a few)

Edmund Singleton from Winstion Communications, February 5, 2014 at 5:19 a.m.

This is so simple that its painful, a well informative, entertaining commercial is never skipped and is watched over and over again, I do it all the time...

Cece Forrester from tbd, February 5, 2014 at 5:32 p.m.

Why not allow commercials to be skipped selectively, one by one, after a few seconds to establish what it is and whether it's irrelevant to you or you've seen it 15 times? That's how print works. Just because you may not want to see some of them doesn't mean you don't want to see any of them.

Doug Garnett from Protonik, LLC, February 5, 2014 at 5:32 p.m.

Ah, Michael... No need to be demeaning because my area of practice is direct marketing. These studies come from many sources - including some of the best general advertising researchers. The 50-year dynamic is essentially this: 1/3 of consumers have always mentally skipped ads, about 1/3 have skipped some/watched some and about 1/3 watched almost all. Primarily, DVRs allow people to automate their preference. In addition, with the DVR, when there's an ad you care about, it can be rewound and re-watched either for yourself or to show someone else. And, since DVR's allow time shifted programming, when you buy a program to reach a specific audience you will reach a larger share of the audience (the ones who wouldn't have seen it without time shifting). Net out... DVR's increase ad effectiveness on TV. I know ad agencies decided they could be nothing but bad...But ad agencies are generally quite poor at predicting the impact of media change since too many try to impose their wishes instead of listening for reality.

Fraser E from Opinions expressed herein are solely my own, February 5, 2014 at 7 p.m.

I see Michael is a graduate of the "I Mean, Think About It" School of Research. Never mind empirical studies showing little to no actual "DVR effect", one of which is this one from Duke http://hbr.org/2010/04/advertisers-learn-to-love-the-dvr/ar/1

Whose author Carl Mela previously listed all the following articles pointing out that even fast-forwarders have ad recall:

[1] Brasel, S. Adam and James Gips, “Breaking Through Fast-forwarding: Brand Information and Visual Attention,” Journal of Marketing, 72, 4 (November), 31-48.

[2] Goode, Alister (2007), “Duckfoot: 'What Happens at x30 Fast Forward,” in PVRs and Advertising Exposure: LBS Conference Report and Update, Sarah Pearson and Patrick Barwise, Editors: London Business School.

[3] Mandese, Joe (2004), “Equitable's No Longer Questionable: Data Reveals Nets Position Some Advertisers Better than Others, Media Daily News, (September 17).

[4] du Plessis, Erik (2007), “DVRs, Fast Forwarding and Advertising Attention,, Admap, September, 48-51.

[5] Siefert, Caleb, Janet Gallent, Devra Jacobs, Brian Levine, Horst Stipp and Carl Marci (2008), International Journal of Advertising, 27 (3), 425-446.

The bottom line is, even though "we all skip ads", most viewership is still done live, skippers still pay attention and in some cases watch repeatedly, and neither DVRs nor over-the-top TV penetration hasn't yet appeared to have a material effect on overall TV ad effectiveness.

Edmund Singleton from Winstion Communications, February 6, 2014 at 6:08 a.m.

I have my favorite commercials and have watched them over and over again...just like a piece of fine music...

Michael Natale from MCM Media Sales, February 6, 2014 at 10:19 a.m.

Simple equation Fraser and Doug: More devices and alternative media choices like (DVR's, Ipads, Smartphones, Netflix, don't forget the good old Remote control) = more ads skipped...if more Ads are skipped, how can Ad effectivness remain constant? That's not an "I mean think about it" school of research, that is just reality.
Also Fraser, I am sure that advertisers love spending millions on their Creative assets to have "some recall from a 30X fast forward skip"

The way you all describe commercial watching (and Sir Ed who certainly fits the bill for Einstein's theory of Insanity), you would think that the Networks should devote a full half hour or hour to commercials as if it were a sitcom or drama and people would watch.

Most importantly though and what you don't seem to understand or address, is the fact that the power to buy most of the brands that advertise (Autos, Tablets, Smartphones, etc) comes from "the affluents" which, they by their very nature, income levels etc, do not have as much time or the inclination to waste hours of their lives watching ads (aside from live sports which has it's own issues namely numerous distractions during commercial breaks through tablets, smartphones etc), and these are the people that advertisers want and need the most to drive sales.

Lastly, (and there is an article in the trades today regarding Disney's earnings and their only "miss" came from their O&O Television group that suffered from lower ratings and demand, BUT made up for it by charging HIGHER RATES. Each year ratings drop bar none and rates go up and advertisers seem to forget that they are paying more for less...

You are defending the indefensible. That is not "Me Search" it's common sense.

Fraser: I am sure the advertising companies

Fraser E from Opinions expressed herein are solely my own, February 6, 2014 at 12:57 p.m.

Michael, the simple equation you keep ignoring with your I Mean Think About It diploma is more devices and alternative media choices hasn't (yet) had a negative effect on the ability of TV advertising to drive sales. Period. End of story. You can posit all you want about how more devices and more opportunity for ad avoidance means more skipping, but facts are facts, while anecdotes and theories, no matter how sensible they may seem, are not facts. And, if you want to *think* about it, ad avoidance has existed ever since people have had the ability to leave the room or change the channel. The biggest difference now is that we can quantify it. We can also quantify its effect, and that is, so far, nil.

Michael Natale from MCM Media Sales, February 6, 2014 at 1:16 p.m.

Fraser you can send all the "independent studies" you want and believe them all you want (how many of these studies are by stakeholders in the tv business that need to protect their piece of the pie?).

How can lower ratings (fact), more commercial avoidance (fact) and more distractions via devices social, tablets etc (fact) = nil affect on driving sales via TV?

So I guess you tell your TV advertisers each year "hey guys the ratings are down again across the board but we HAVE to pay the freight if you want the same return on investment from years past" despite all the above FACTS. I get it, tv is the bread and butter of your ad agency so why upset the apple cart?

Those stats are all irrefutable.

Michael Natale from MCM Media Sales, February 6, 2014 at 1:25 p.m.

And by the way we can trade links to studies all day long that advance each side of the story: Here I just DUG this up online:

http://www.ipsos-na.com/products-tools/media-content-technology/audience-measurement-understanding/the-ipsos-affluent-survey.aspx

And you still haven't addresses the point regarding the affluent audience and their higher "commercial avoidance" X their spending ability.....because you can't.

Fraser E from Opinions expressed herein are solely my own, February 6, 2014 at 2:22 p.m.

I'm not sure how many people are now, or ever were, relying solely on TV to reach a particularly affluent audience, so I'll leave that straw man to you.

And don't mistake my calling BS on your facts-bereft assertion that TV can't work because of growth in ad-skipping opportunities as some kind of flag-waving for TV as the savior of all marketing challenges. Not even close.

The bottom line remains this: You called bullshit on this article because you believe the proliferation of ad-skipping opportunities means TV advertising doesn't work. You also appear to have a personal bias against TV viewing, but nevertheless, regarding its efficacy as an advertising medium, those of us with results in hand know that you're simply wrong.

Michael Natale from MCM Media Sales, February 6, 2014 at 3:02 p.m.

Every point I stated is based in fact.

Ratings are lower year after year, isn't that a fact?

There are now, more than ever before more technology/devices/alternative media viewing platforms that weren't previously in existence that suppress commercial viewing on TV...Fact

Advertisers continue to pay MORE MONEY each year for said LOWER Ratings....Fact. I mean I don't see ABC, NBC, Fox and CBS saying..."you know what...we s&$t the bed again this year in ratings so we are going to lower our cpm's 10% because we like you P&G, Ford, Walmart."

My bias as a seller of digital media is that TV gets the lions share of the dollars and the viewership is not what it once was but cats like you continue to say "it still works great"

Michael Natale from MCM Media Sales, February 6, 2014 at 3:05 p.m.

Not solely but the affluent audience moves the needle in sales....or haven't you heard of the (80-20 rule)....or the income inequality gap. Do you happen to have any idea how many people can actually afford a New car in their lifetime, let alone this year.

John Grono from GAP Research, February 7, 2014 at 5:07 a.m.

Michael, many products cost more and deliver less these days. Chocolate bars is one (yum!). A lot of FMCG goods would also fall into this category. I can think of another. Banner ads. I can recall CTRs of 7-10%. Now you're lucky to get 0.3%. I'd wager that the ratecards have increased over that same period of time rather than follow the downward trajectory of delivery. Does that count as fact?

Michael Natale from MCM Media Sales, February 7, 2014 at 2:10 p.m.

I wouldn't know John, as I don't (or ever would) sell banner ads but I doubt they increase at the rate that TV ads have increased each year, to make up for lost ratings/revenue. That's my point, there is NO consideration for the advertisers because Networks need to make up for the ratings shortfall...and that shortfall comes from a variety of different places (all listed above), so to say that response to tv ads has not been affected "yet" is such a false and misleading statement and has nothing to do with "I mean Think about it" as Fraser mentions. And it's good that chocolate bars shrunk and cost more, because too much sugar is not good for you. :-)....I can't say the same is true about tv ratings and the cost benefit ratio there.

John Grono from GAP Research, February 7, 2014 at 3:50 p.m.

I see Michael. You say that you wouldn't know about banner ads because you don't sell them. So, given that you are happy to comment at length about TV ads, does that mean you must sell them in order to know?

Michael Natale from MCM Media Sales, February 7, 2014 at 4 p.m.

I have sold both John. TV has been what i sold most in my career but sold banners during the internet boom. SO i should have said "I would never again sell banner ads"