The Evolution of Television Inside A Digital World

Did you tune in to watch the game? Many of us watched Patrick Mahomes lead the Chiefs to a fourth-quarter comeback and their first Super Bowl title in 50 years, 31-20 over the 49ers-LIVE. Along with certain news and political events, the Super Bowl is one of the few remaining live viewing moments left on TV. One of the highest viewed shows in the United States, FOX was able to command $5MM to $5.6MM per ad, so the stakes for advertisers with this significant amount of investment could not be higher.

The peak of viewership for a live Super Bowl event was in 2015, watched by over 114.4 million people. Viewership of linear televison is evolving at an accelertated rate. Live viewing is becoming more obsolete as we are accustomed to video on demand. Along with evoloving technology, there are no more fresh "Seinfeld" episodes, allowing us to gather around the water cooler and discuss the absurd humor about nothingness-nor can a brand advertise on "Oprah" to watch product sales easily lift into the double-digits; audiences now series binge on Netflix.

Netflix, as I'm sure you know, is a subscription-based streaming service that currently doesn't want to offer advertising. I pay for Netflix and even signed up my aging parents who reside in Peoria, IL. You'll discover why the compulsion to sign them up a little later in. I tip my hat to colleagues from YouTube and JPMorgan Chase during a panel at IAB’s Digital Content NewFronts-we are aligned that Netflix has no choice but to start displaying ads if they are to see further growth-and it is known within the media community that Netflix began recruiting people last year to help grow their advertising business. With a market cap of $162.2 billion compared to Disney's $250.4 billion, Netflix needs to migrate into ad-supported content if it is to grow. Just how competitive is the new business model in streaming? Disney pulled their programs from Netflix, and Amazon removed their programs from Roku. The gloves are off in the competition for audiences.

The Evolution Towards Streaming

There was once a media term used in application referred to as "Roadblocking". Roadblocking occurred when a brand elected to air an ad across all three major networks at the same time. Regardless if you flipped the dial, there was no escaping the ad on NBC, CBS, or ABC.

Although beginning in 1948, cable television wasn't prolific in the U.S. until the 1970s. At the time, I was in the demographic that Battle Creek, Michigan's "Kellogg's" cereal and Pawtucket, Rhode Island's "Hasbro" toys would seek out. Unlike other households in my neighborhood, we didn't do the cable television connection until much later. I watched my first music video on MTV at a friend's house-Radio Gaga by a group that called itself Queen, through a network that had an astronaut on the moon as its logo. Not having that connection to cable bothered me, just as not being connected to a Netflix today would bother me. Pushing my parents along to embrace technology, perhaps somewhat personally traumatized from not having the latest media offerings in my childhood, is why I elected to get them their own Netflix accounts. My dad still has a VCR, but has learned to jump onto Netflix from the Apple TV I gifted several Christmases ago. As we age, we are more likely to cling to what we know, because it has been programmed inside of us as "safe", a primal survival trait-and we drag our feet towards progress. This is why the "older" demographic is still doing well for traditional TV. Baby boomers are once again the sweethearts, at least for linear TV advertisers.

As cable progressed, television audiences began to fragment. A fascinating device known as the VCR commercially came out of Japan and made its way into U.S. homes around 1977, beating out BETA. It wasn't until the 1980s that the VCR really boomed.

Superman, 1978

My first VCR experience was watching Superman, with Christoper Reeves draped in a red cape after finding an available phone booth (remember those?). Lex Luthor's plan to sink California into the ocean had worked and Lois Lane soon died in her car as a result. A sad cinematic moment, but thanks to the quick thinking of our beloved Kryptonian alien-circling the globe to turn back time, Lois was saved-and the entire world was touched with the magic that a man could fly and even turn back time. Even more magical was the beginning of programming selection on our terms.

Blockbuster Video stores were born. The first Blockbuster began in 1985, located in Dallas, Texas. In 1997, it was bought by Viacom for $8.4 billion dollars. In 2010, Blockbuster filed for bankruptcy and by 2013, announced its plans to close its remaining stores. At its peak in 2004, Blockbuster employed 84,300 people with 9,094 stores worldwide. So what really killed Blockbuster video? A little known fact: it was the movie "Appollo 13".

Silicon Valley veteran Reed Hastings had founded Netflix in 1997, partly out of frustration after being fined $40 by Blockbuster for being late in returning “Apollo 13.” Netflix provided convenience without late penalties, a superior model over Blockbuster. Even more so, three years before Blockbuster filed for bankruptcy, Netflix began its online streaming service in 2007. Refusing to evolve alongside technology, Blockbuster executives ignored progress and fooled themselves with internal data that stated the consumer experience of being in a Blockbuster-picking out popcorn, browsing movie selections, and running into neighbors, was enough to sustain their business. If anything can be taken from this failure, it is the requirement to evolve alongside how audiences consume media and to realize that convenience is the greatest customer experience of them all.

It took a while for us to jump from the older technology of the VCR to DVR cable set-top boxes. On-demand happened through satellite and cable providers. No longer confined to programming schedules, we became free to consume our television content anywhere and at any time. And then connected TV (CTV) came along.

CTV is simply television that connects to the internet. Unlike traditional TV, CTV is managed through apps instead of stations. To get CTV, audiences use Smart TV's, Apple TV's, devices like Tivo and Roku, and gaming consoles like X-Boxes and PlayStations. The apps on CTV offer all of the programming we desire on our terms, from streaming apps like Hulu and Netflix to the trusted ABC, NBC, and CBS (yes, they've evolved). Unlike on-demand through a satellite or cable provider, CTV is entirely digital-and with digital comes data points on every consumer.

TV has changed-and yet it has changed to the advantage of the advertising community. CTV allows brands to combine the impact of linear TV with the precision of digital.

In terms of viewership, linear television advertising is still one of the most effective ways to create both awareness and purchase consideration about a product or brand to many audiences. It is still an immediate audience accumulative methodology for brands to harness. However, one cannot dispute both the effectiveness of hyper-targeting via CTV and the continued erosion of audiences that once consumed linear TV over 3 hours a day.

The TV ad business model is in a time of major evolution. Yes, we all still gather around to watch ads during the Super Bowl, but things have definitely changed since the advertising heyday portrayed in the show “Mad Men,” when one TV ad could change the world—or at least turn around a company’s sales numbers.

TV Upfronts and Sweeps

If you've been involved with the television industry as I have, either as a brand or inside an agency, you’ve likely heard all about the upfront season. It’s the advance-selling season in the spring when marketers can buy television commercial airtime (and digital ads) several months before the fall season begins. The first upfront presentation took place in 1962, and now each year major networks reveal their upcoming shows and hope the ad space sells. There’s also the TV “sweeps” periods, which happen during set times during the year when shows will suddenly start having special guests or huge must-see events. In turn, Nielsen data and ratings from that period are used to determine advertising rates for local stations.

For years, advertisers and networks have used Nielsen alongside the pricing metric CPM (or cost-per-thousand, a barometer of the cost of reaching 1,000 viewers). These days, that measurement is becoming less important as the traditional age and gender-based CPM is slowly becoming outdated. With data points available to decide if a consumer suffers from an ailment, is open to trying new brands, and is influential to peers, for example, the traditional CPM plays a smaller role. If advertisers start to focus on targeting very select types of audiences, they can easily stop guessing which female age 18-24 will consider the purchase.

On average, products and brands typically tend to commit between $8 billion and $9 billion to broadcast primetime TV advertising-and another $9 billion to $10 billion every year as part of the upfronts. For decades, shows that aired between 8 p.m. and 11 p.m. were the prime targets. It’s still a coveted time slot, commanding highest attentiveness levels resulting in greater retention and thus, the greatest purchase consideration. However much coveted, the push to digital is making primetime less desirable. Furthermore, when adjusting for cost per acquisition, the higher CPMs primetime commands cannot generate the returns that offer a 3 or 4-to-1 return on the media dollar that less expensive dayparts can provide. We have always saved primetime as an extra reach mechanism once ad budgets increased, understanding a lower, yet valuable return due to the higher CPM.

Going Digital

The TV advertising model changed drastically nearly four decades after I watched Superman on the VCR or experienced my first music video on MTV with the advent of DVRs and CTV. In 2014, we really began noticing a shift as Time Warner, a wonderful partner who awarded my agency with the prestigious "Precision In Advertising Placement" award, said that domestic advertising revenue at its Turner Broadcasting cable networks (CNN, TBS and TNT) was disappointing. Now inside of 2020, revenues have stalled while ratings continue to erode-and at an accelerated rate for younger demos. Networks still charge the same price per show even though their viewership continues to decline. This is why NBC Universal's CNBC announced that it won't rely on Nielsen data for its daytime business-news programming any longer.

When it comes to TV advertising, a new business model has taken shape. Many brands are moving portions of their budget to online video and streaming ad-supported services across CTV to target younger audiences.

The Bottom Line

We must evolve along with technology to follow trends in media consumption. Ignoring a fact like Blockbuster did can be catastrophic. Linear TV advertising is no longer the prime real estate for all brands trying to solicit sales. While event shows like the Super Bowl remain remunerative, companies are battling things like DVRs, online streaming and especially younger audiences who get their entertainment online, on their phones and through CTV apps.

Still, traditions like the upfronts and sweeps weeks remain as linear TV isn't dead for all brands-and TV ads are an important part of any company’s marketing plan.

Today we have data to reduce wasted media dollars and solicit only those in the market who will consider purchasing now or in the near future. We have data that tells us if those people will influence their peers. We have the technology to serve ads to every screen a consumer is on immediately after an ad on CTV is played. In regards to my agency, OBM has deals with Amazon and Roku very few have-and combined with 7 digital service providers (DSPs), we have priority access to 98% of premium CTV inventory available. Never before have brands been able to harness the influential power of television with the precision of digital.

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Cary Herrman began his formal marketing career in 1999, working with MGM to promote its television division and with Capitol Records to promote various artists. In 2001, Cary began working with Den Mat's Rembrandt Toothpaste, making it the #1 teeth whitening brand which led to a profitable sale of the brand for Dr. Ibsen. During this time in 2003, Cary co-founded Ocean Bridge Media Group focusing on CPG and DR marketing, launching brands and working with established pharmaceutical companies. Cary specializes in brand message, media, and marketplace with an emphasis on navigating today's fragmented media-seamlessly combining traditional with the latest media. From baby to candy and grocery, household cleaning to health and beauty, entertainment to insurance and real estate, Cary's experience is expansive and invaluable as a speaker at many industry events.  

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