Ad-Free Netflix Helps Publicize Ad-Filled TV

Last year, my wife and I sat through what feels like the thousandth conversation where friends and families raved about the BBC show, “Last Tango in Halifax.” It  captivated just about everyone we knew. Intrigued, and frankly tired of sitting out the conversation, we signed onto Netflix to see what the fuss was all about. We were hooked! Within a couple of weeks, we were caught up on the first two seasons and eagerly anticipating the start of the third.

Put another way: the BBC expanded its live audience for the show by two.

Binge watching is America’s new pastime. Some 75% of TV viewers admit to it, which comes as no surprise, given that services like Netflix and Amazon Prime offer entire seasons at once. These media companies have changed the way we view TV. But does it also follow that these subscription-based streaming services have eliminated television advertising as we know it? And if it’s dead, how will advertisers reach the crucial millennial generation?
I don’t think so. To broadcasters, Netflix, Hulu, Amazon Prime and other multichannel video programming distributors (MVPDs) are syndication models in the traditional sense of the word. No one goes there to watch last night’s episode; they go to watch last year’s.
For the original creators, these are classic syndication exercises; content is sent to them after the originating network exhausts all of its first-airing and first-look opportunities.
The fact is, Netflix is actually building audiences for appointment TV, not eliminating TV advertising.
Let me give you another example. About a decade ago, I missed the first season of “Lost.” Since this was in the pre-streaming era, my only option to catch up on the seasons I missed was to purchase DVDs of the previous seasons. That wasn’t going to happen, and so ABC lost my family and me as viewers (along with its chance to increase viewership for its appointment airing). In this very real respect, one can argue that Netflix is expanding the publisher’s advertising opportunities.
In addition to Netflix helping to build audiences, content producers are benefiting from the inherent flexibility provided by the MVPDs and DVRs of the world.
For publishers, this flexibility in viewing live TV offers two significant benefits. First, Nielsen’s C-3 metric, which counts the number of people who watch a show within three days of its live airing, means they have larger audiences for the advertising opportunity.  Audience equals revenue in the network world.
Second, all of the MVPDs that show their content know a great deal about their consumers and their viewing habits. In other words, DVRs open doors in terms of data-driven advertising opportunities for brands.
This development is coming at an opportune time. CMOs, keenly aware of the ROI of honing in on their direct audiences, have begun to question the value of spray-and-pay TV advertising. MVPDs solve this issue by allowing marketers to target households with, specific auto-intenders--e.g. “moms who are actively planning next summer’s family vacation” or “young professionals looking to buy their first new car”--with their ads. Moreover, the return-path data can tell the advertisers whether or not their ads were presented to those households.

These opportunities are still in their infancy, with privacy and issues of scale that will need to be worked out, but data-driven TV is the future. From my perspective, I see the networks and MVPDs cooperating with one another to their mutual benefit. By sharing audience data with the network and vice-versa, MVPDs can better monetize their ad slots and networks can help advertisers pinpoint the programming and day-parting in which their audiences can be found.
We now know that Netflix won’t kill TV advertising, but we also know that streaming services sit on a vast reservoir of viewer data. My hope is they will resist  the temptation to build walled gardens. More parties making more connections with more creativity drives greater demand and liquidity than a monopoly can.

Even second-run content attracts specific audiences, offering insights to the creators and the advertisers. That information can help them  make strategic decisions about developing new shows. By helping publishers use data to feed their content funnel, the streaming services ensure their own future. Streaming services are investing in their own content, but they still need to ensure that subscribers have plenty of additional media to consume, lest they question the value of paying $10/month for their service. I can binge watch an entire season of “Mozart in the Jungle” in two days - then what?

Advertising in the past has been viewed as a cruel Darwinian force which determines the life expectancy of a show. This new era means that streaming services can coexist with live TV, offering a complementary revenue stream that can let non-breakout-hit shows gain additional time to find their audiences and mature.

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