February 10, 2009 – Trends in content deal making, advertising and consumer behavior suggest the electronic video market is reaching a point of equilibrium where the distinctions between Web and TV are less significant than the synergies.
While the trend toward more entertainment consumption online in comparison to time spent with the TV continues among people in the “Millennial” 14-25 age bracket, TV remains the dominant source of entertainment across all other age groups and continues to out draw online even among the Millennials, according to new research commissioned by consulting firm Deloitte’s Media & Entertainment practice. And, in all age groups, TV advertising registers far greater impact than any other medium, with online a distant third behind TV and magazines.
At the same time, the lines between professionally produced Web and TV video are blurring as big media firms and startup digital studios increasingly cross-pollinate the two media with their output. Indeed, the disruption going forward may be more about Web content entering the TV space than it is about Web content drawing viewers away from the TV.
“The key is, if you’re a programmer or an advertiser, you want to reach people where they are,” said Diane Robina, president of Comcast Emerging Networks, who was a participant in a panel discussion at last month’s National Association of Television Program Executives convention in Las Vegas. “Millennials don’t watch linear TV. Everything is DVR’d or from the Web. They’re screen agnostic.”
Moreover, Robina added, the blurring of the lines between screens is sure to accelerate as consumers buy new HDTV sets. “This is another big trend,” she said. “All of these beautiful big-screen TVs we saw at CES (the Consumer Electronics Show) are optimizing online content for TV and bringing it to the couch.”
The Web influence on the TV viewing experience extends beyond exposing Web-posted short- and long-form video on the TV. There’s a transformative impact coming directly from how TV programmers are leveraging the creative output of digital studios, whose primary focus traditionally has been content development for the Internet.
“We wanted to be and are on the Web,” noted Jordan Levin, CEO of digital studio Generate, which just cut a deal for traditional TV distribution of its content with 20th Century Fox. “But we’re seeing that, in reality, there’s a need among major media companies for digital partners to be content producers. It’s similar to the old independent producer model we had in the TV industry years ago.”
Indeed, noted Tom Zappala, senior vice president for program acquisitions and scheduling at ABC Family, “Some of our shows, before they go into linear TV, are premiering on online affiliates like [Comcast’s] Fancast. Scheduling has become more complicated than ever.”
The multi-purposing of content isn’t merely a matter of how the releases are timed; it also involves creative efforts to make it distinctive for each platform, Zappala noted. “We have cable, telco and satellite for TV, Web portals, including the Disney-ABC platforms, iTunes,” he said. “We try to get something new for each platform. There are more people to satisfy than we’ve ever had.”
Cross-platform distribution greatly complicates the licensing process for Disney-ABC as it pulls together content from independent producers and other sources, he added. Where a producer might be willing to grant exclusive rights for one distribution channel, getting exclusive rights across all channels is much harder. “It’s all about exclusivity,” he said.
But, even as Web, proprietary distribution channels and mobile gain importance, for TV networks like ABC Family TV remains the driving force behind content development strategies.
“Our online content choices are more about the extension of our brands,” Zappala said. “When people come to ABCFamily.com, they’re looking for content that’s an extension of what they see on linear TV.”
Such thinking is very much in tandem with what research says about entertainment consumption and the impact of advertising. In its survey of 8,824 consumers in the U.S., the U.K., Germany, Japan and Brazil, Deloitte found remarkably similar patterns in how people spend their time consuming entertainment and which venues deliver the biggest advertising impact. In the U.S. watching TV scored 66 percent in survey respondents’ rankings of media types by personal preference, with watching movies at home and listening to music scoring 51 and 48 percent, respectively. Online was fourth at 38 percent.
While Millennials broke with the pattern to deliver a score of just 47 percent for TV viewing, that medium still ranked highest in their preferences while online was fifth as opposed to fourth for the population as a whole. Online, ranked 39 percent by Millennials, was behind “going to the movies,” which registered 42 percent with this group versus 29 percent with all ages. Similarly, the percentage of U.S. respondents saying they watch video content on their TVs daily or almost daily was 65 percent, with Millennials at 68 percent, versus scores of 34 percent for the PC across all age groups and 38 percent among Milleninials.
These patterns held up among respondents in the other four surveyed countries, with the exception of Brazil, where watching movies at home and online were ranked higher than TV. Respondents in Brazil reported they spend 32.5 hours per week online compared to just 9.8 hours watching TV, in contrast to the U.S., where the weekly total averaged 17.8 hours for online and 15.8 hours for TV.
Respondents’ assessments of advertising impact also attested to the strength of TV in surveyed countries, including Brazil. In the U.S., when asked to rate which media have the most impact on buying decisions, respondents ranked TV highest with a score of 88 percent, followed by magazines at 49 percent and online at 48 percent. Newspapers, at 42 percent, were the only other medium with a ranking above 40 percent. These patterns held elsewhere, with the exception of German and Japan, where online advertising ranked ahead of magazines. Interestingly, mobile advertising had a 19 percent impact rating in Brazil, compared to low single digit ratings everywhere else, including three percent in the U.S.
While content suppliers and their advertisers clearly want to see improvements in TV ad performance, they just as clearly don’t look on broadband distribution as a short-cut to higher ROI on advertising. Digital studio executives know as well as anyone why this is the case.
Noting how hard it is to get deals for new content in the Web space, Sarah Szalavitz, cofounder and CEO of digital studio 7 Robot, pointed to uncertainties over the effectiveness of online advertising as key impediments to content development for the Web. “The industry hasn’t figure out what the measurement metrics are for determining if ads are working,” Szalavitz said.
While the Web is touted as a generator of highly specific data on ad impressions and click throughs, there’s no mechanism for measuring effectiveness, she noted. “In the TV space advertisers are accustomed to following up on scheduled advertising with measurements of purchasing activity,” she said. “They run a restaurant ad and then measure how many people come into the restaurant. We don’t have that on the Web.”
While the Web counts impressions, it isn’t measuring whether people remember those impressions, she added. And, given how frequently people online are in multitasking mode with other distractions, there’s no way for advertisers to know how multitasking is affecting ad awareness, she said.
Generate’s Levin, while noting there’s a certain “leap-of-faith” aspect to advertising on Web video content, suggested that even though there’s no consensus on how to measure behavior on the Web, the raw data is there to provide people the information they need if they put their minds to it. The real problem, he suggested, is not enough agencies and advertisers are ready to make that leap of faith.
“There’s a lot of risk aversion out there,” Levin said. “We’re flying by the seat of our pants, taking a lot of risk trying to figure out what the models will be. This industry needs support from brands like it has received from technology. Clearly, we’re drawing the next generation of viewers, so advertisers have to figure out how to reach them.”
But given the rising tide of Web content making its way into the TV space, there’s every likelihood that advertising support for new content, including content targeting the Millennials, will grow. The key will be how successful the programming industry and its advertisers are at finding better models for targeting and measuring ads in both spaces.