Commentary

A World Without Commercials? Contemplating The Future Of TV

Are commercials doomed? That question occurred to me as I contemplated the writing of this TV Blog on the future of television.


I asked myself an open-ended question: What will the future of television be like? As I thought about the answer, it wasn’t the nature of the programming -- i.e., content -- or the proliferation of platforms for distributing that content that kept coming to the forefront, although those will continue to evolve in various ways.

Instead, it was the whole question of how, or even whether, advertising will continue to be a part of it. It was then that I began to realize how much the concept of the TV commercial -- the thing that has provided the financial and to a great degree, the creative underpinning of the whole business since time immemorial -- is under assault.

Consider the question you hear all the time at media industry “summits” and all-day conferences. Invariably, a speaker preparing to make a point about the evolution of media and advertising will warm up his audience by asking for a show of hands from anyone who routinely fast-forwards through commercials when they DVR their favorite shows. Almost everybody raises their hands, of course, even when these audiences are filled with people in the advertising business. Nobody likes commercials -- not even them.

For decades, a viewer really had no choice but to grin and bear the commercials on TV, since there was almost no means for enjoying TV shows other than by watching advertiser-supported broadcast television with its commercial breaks. Commercial-free PBS was an option, but few people could live on a TV diet that was PBS-only.

HBO eventually introduced the pay-TV/no-commercial model, and although it took years for HBO to evolve and grow, it is that model that appears to finally be taking over the TV business. Today, many programming services are commercial-free (Netflix being the highest-profile example, along with HBO and Showtime) and many people seem willing to pay for them without batting an eyelash.

To me, that’s the great divide in television -- the tension between so-called “free” TV and TV you pay for. Younger people have no idea that there was once a time that many of us can still remember when paying for TV was something only a nut would do. TV came to your home for free, over the air, as long as you purchased a TV set. We all understood that the commercials -- i.e., the sponsors -- paid for the shows so we didn’t have to.

At some point, basic cable decided to try and see if it could earn money both ways -- by selling commercial time while also collecting subscriber fees. Incredibly, the viewing public was OK with this scheme and cable TV, with its dual revenue streams, became a great business.

Today, however, basic cable’s reliance on commercial revenue has collided head-on with steep ratings declines resulting in lower ad rates. So with commercial rates in free fall, the cable networks have loaded up on commercials to head off the revenue shortfalls. However, the commercial breaks on basic cable have become so interminable and frequent that they are depressing viewership even more. Commercial-hate inevitably grows out of such schemes.

This is part of the reason why you’re hearing so much about cord-cutters and even “cord-nevers” -- people who won’t even consider subscribing to so-called “linear” cable. But you never hear about people who you might call TV-cutters or TV nevers. Instead, what you have is an increasing number of people who can’t live without some sort of TV and don’t seem to mind racking up fees on their credit card bills for streaming services.

These people seem proud to be exercising freedom of choice when it comes to their TV viewing, but they’re paying for it. Meanwhile, they’re dodging exposure to any commercials.

If this kind of TV viewing represents how the majority of TV (or “video”) content is to be consumed in the decades to come, then the idea of taking a break for a commercial would indeed appear to be doomed.

So what will replace commercials? In all likelihood, you will see more and more in-content advertising -- with sponsors paying for their brands to be part of storylines or at the very least, seen during a show. We’ve already seen this for several years on the broadcast networks (remember how Subway took over “Community” on NBC?).

In the future, the TV shows and the commercials will be one and the same. And viewers will pay to watch all of it.

4 comments about "A World Without Commercials? Contemplating The Future Of TV".
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  1. Leonard Zachary from T___n__, November 16, 2016 at 2:24 p.m.

    Pay-TV is overpriced. What say you Ed?

  2. Ed Papazian from Media Dynamics Inc, November 16, 2016 at 2:32 p.m.

    Very interesting, Adam, but I doubt that TV will evolve into what amounts to paid programming with advertising "sponsors". For one thing, "free TV" isn't free to begin with. The average viewer is paying for TV, including many, many shows that he/she never watches. So to fix that, you have to undundle everything and create the mystical world of OZ where everybody can pay only for shows or channels they want. Problem is that many of the channels and shows that some of us desire will disappear under such a system, leaving us with the "usual suspects"---CBS, ABC, Fox, NBC, CNN, ESPN, etc ---and probably at much higher prices than we think. Yes, a little unbundling is possible but not on the massive scale that would totally revamp commercial TV. As regards content, there are many kinds of content, aside from primetime entertainment series and an ocassional "special" that consumers need---like most pro sports, news, talk shows, game shows, documentaries, all sorts of movies, kid shows, cooking shows, How To shows, etc.. They get these, now, as part of their "pay TV" bundles. As stand alones, however, most are simply not viable because they would not recruit enough paying subs to generate a profit.

    Another thing that gets lost in these discussions is how the TV content distribution chain actually works. Your typical primetime sitcom or drama hit, may last 4-6 seasons on the air and is probably a break even proposition fot the producer and its network "partner"---or the show may even operate at a loss to both parties. That's fine, as the producer knows that his show will  be rerun endlessly in syndication rerun cycles, reching many new as well as old viewers and bringing in huge profits as most of the production costs are amortized. So advertising, in the initial stage, actually supports the basic production cost----the real profits, as well as huge amounts of reach and viewing tonnage---come later. Under a pay for what you want system, many TV shows of all kinds, including primetime entries, would never gain critical mass, unless they found a way---that is now built into "the system"--- to guarantee themselves future syndication revenues. The alternative is for priducers to hedge their bets and charge much higher fees for their first runs, which might make it difficult to garner enough subs to get the projects off the ground.

  3. Daniel Olson from The Loyalty Consultants, November 16, 2016 at 2:37 p.m.

    Adam, I think you are correct on the point that viewers want the entertainment to come to them for free, but do not want to have to endure commercials. But the truth is the revenue to drive creative development of content must come from somewhere. I think consumers/viewers in the end will find themselves with a decision: How much am I willing to pay for my entertainment and this may be more than just money. As in app usage, I have 30 plus apps on my phone and I use 5 to 7 on a regular basis. Entertainment will most likely be the same. While there may be lots of choice, you end up engaging, (paying for), with just a few. So, the real challenge might be that the companies that have played the role of distribution and delivery will now also have to think about attracting and sustaining their viewer audiences based on more than just the content they provide. This will require a differentiation in the customer expereince between one app / network and another. So, the question is, how is the experience of watching TV going to change to focus on what and how cosnumers / viewers are wanting it to be. Because in the end they will be the ones paying for it.

  4. Ed Papazian from Media Dynamics Inc, November 16, 2016 at 3:42 p.m.

    One of the exclusive analyses in our annual, "TV Dimensions", deals with the "average adult" and his/her consumption of TV content---linear TV, that is. On a typical day this mythical average adult watches all or portions of about 6 TV shows---across all dayparts, not just primetime. And this is done on just over three channels. Over time, however, the number of channels sampled rises to 14 per week, 24 in a month and culminates, at the end of 12 months in 44 channels seen, with over 2000 telecasts consumed on those channels. While much of this is due to the consumer coming back day after day to certain favorite news, talk or syndicated game shows or "courtroom" entries like "Judge Judy", a considerable amount of sampling goes on as the days pass, allowing the viewer to find new shows that might become favorites---if their existence was known and said sampling produced a favorable verdict. My point is that, like all "package deals", you get a lot of stuff you may not specifically want along with a few shows you really enjoy. Without  bundling, and the massive amount of content it provides, you are probably stuck with a handful of  suppliers---mostly the TV Establishment, I'm afraid---- not the wonderful masterpieces that some think come only from non-network sources and "edgy" cable programmers and you probably will have to pay through the nose for this content when alternative , now unbundled ,networks are eliminated due to inadequate subscriber funding.

    We also have to think about the aftermarket impact of many shows that vary greatly in quality but stock the daytime and fringe evening timeslots on independent stations and all times on many cable channels. Dramatically reduce the number of "off-network" shows coming down the syndication pipeline and you massively disrupt the availability of content, mainly in non-primetime hours, which account for 45-65% of the average person's current TV diet, depending on what demo is involved.

    So to answer the question posed by my esteemed fellow poster, I would say that the current bundling system, while not exactly a perfect solution for those who are very light or extremely selective and fussy viewers, it's a fair bargain for most viewers and, especially, the Trumpites, who probably watch a lot more of the stuff than the elites. Since the heavy viewers---about 20% of the population---do 50-55% of the viewing, their economic importance to the "pay TV" system can not be underestimated.

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