New technologies challenge network TV
More viewer choice means competition strong for ad dollars
By Julie Stauffer
Business Edge, Ontario Edition
Published: 08/04/2005 - Vol. 2, No. 16
http://www.businessedge.ca/article.cfm/newsID/10204.cfm
The traditional network TV model of earning big advertising bucks based on
big audiences is becoming obsolete, according to a recent report by
Deloitte Touche Tohmatsu.
Specialty channels, satellite TV, pay-per-view, Internet television and
even TV programs for cellphones mean growing competition for viewers and
for advertising dollars.
"The age of a few dominant channels, funded by advertising, has long been
disappearing and may soon be turned off for good," the report says.
Industry executives disagree, however, and say rumours of the death of
network television are greatly exaggerated.
"Every three or four or five years there's a new technology that is going
to kill TV, apparently, but it's a pretty strong medium," says Rob
Dilworth, vice-president of research for CTV Television.
Television viewing has increased recently, he says, hitting 26.6 hours a
week per viewer in 2004. Historically, the figures have hovered between 22
and 24 hours weekly.
However, Garry Foster, Deloitte's Toronto-based director of technology,
media and telecommunications, says networks must respond to the emerging
trends by broadening their reach to new media channels and formats such as
cellular TV and Internet TV.
Another strategy is deepening relationships with consumers by giving them
more control. For example, CBS announced recently that it will offer an
Internet newscast where viewers can select the type of news they want to watch.
"As the technology improves and the data delivery system improves more, I
think you'll see the opportunities for consumers really to start
customizing their broadcasting," Foster says.
Many broadcasters are experimenting with interactive TV, which could be as
simple as allowing viewers to vote online for their favourite music videos.
A more sophisticated example is Bell ExpressVu's coverage of the Canadian
Open last year, which allowed subscribers with special interactive
receivers to view multiple video streams, change camera angles and get
up-to-the-minute statistics.
Foster says that as the technology evolves, viewers could click on a dress
featured in a fashion program, get more information about it and even buy
it online.
"One of the things that's really going to drive this is going to be better
Internet access," he says, "and as far as high-speed Internet, Canada is
probably ahead of the curve."
The Deloitte report, Television Networks in the 21st Century: Maintaining
Critical Mass in a Fragmenting World, says networks need to lengthen their
content lifecycles by creating physical products such as DVDs, or services
such as video-on-demand. According to a BBC trial, offering content on
demand for seven days after the initial broadcast increased audience size
by 50 per cent.
CTV's Dilworth concedes that the explosion of specialty channels that began
in the early 1980s has eroded audiences for existing channels. He adds,
however, that the erosion halted about four years ago when the rapid
addition of channels slowed down.
Barbara Williams, senior vice-president of programming and production for
CanWest MediaWorks, says broadcasters still create a unique shared
experience, where everyone watches a show such as Survivor and dissects it
the next day.
While those so-called "watercooler" shows continue to bring in big
audiences, analysts, media buyers and industry executives agree that the
traditional network model is changing - and broadcasters and advertisers
need to adapt.
"The sky is not falling," says Dilworth, "but it's changing colour."
According to Statistics Canada's 2004 television report, private
broadcasters saw an increase of just 0.9 per cent, for a total of $2.1
billion last year. In contrast, pay TV and specialty channels reported a
nine-per-cent increase in revenues in 2004.
As consumers gain more choice from specialty channels and pay TV, as well
as new technologies such as Internet TV and cellular TV, they are also
gaining more control over what they watch and when they watch it.
More than 100 million homes worldwide now buy on-demand films, according to
a recent report from the U.K.-based Informa Media Group, generating $4.4
billion US in revenue in 2004.
Meanwhile, personal video recorders are making it easier than ever to
record shows and then skip commercials.
"That does keep many of us up at night," admits Sunni Boot, president and
CEO of ZenithOptimedia Canada, a major media buyer based in Toronto. Early
indicators suggest that PVR owners fast-forward or eliminate between 50 and
70 per cent of commercials.
One response is to make compelling commercials that viewers do not zap.
"People don't skip commercials that entertain and inform them in a very
engaging way," Boot says.
Williams says research has shown that one of the reasons viewers choose
Canadian channels over U.S. ones are Canadian ads, suggesting that people
are not desperately trying to avoid ads.
Boot says the four major English Canada networks still garner 50 per cent
of prime-time viewing, continuing to make them good advertising venues. "TV
as an entertainment and information vehicle is still one of the most
powerful vehicles we have."
More and more, however, advertisers are looking to alternatives to the
traditional 30-second TV spot, such as integrated advertising or branded
entertainment, where commercials become part of the program.
Boot points to the example of RONA Dream House, a TV renovation series that
was created by the Canadian hardware chain and features its products
exclusively.
As well, when networks develop new programs - such as the Falcon Beach
series that will be launched on Global this fall - marketing and sales
staff are being involved from the beginning, rather than selling spots once
the series is produced.
"If it's done effectively," Williams says, "it's an experience where it's
so integrated into the show and so logically there in the show that it goes
unnoticed by the viewer in the sense that they don't feel suddenly they're
watching a commercial."
While the product placement may not be intrusive, she says, viewers will
certainly take note of what trendy clothes the stars are wearing and what
trendy cars they are driving.
Advertisers also are turning to other media to sell their products. The
Interactive Advertising Bureau and PricewaterhouseCoopers reported in June
that Internet advertising was more than $2.8 billion for the first quarter
of 2005, a 26-per-cent increase over the first quarter in 2004, making it
the highest-reported quarter in nine consecutive quarters of growth.
Advertisers are also creating brief Internet movies, such as BMW's series
of short films directed by the likes of Ang Lee and - naturally - featuring
BMW vehicles.
Dilworth and Williams are tight-lipped when it comes to specific plans, but
they are closely watching developments in Europe and Japan where Internet
TV, interactive TV and cellular TV are farther ahead. Both are confident
network TV can continue to thrive and attract advertising dollars.
"Advertising on TV is amazingly effective," Dilworth says. "TV has an
ability to impact the emotions of people, whereas when you simply read
something or hear it, it's a little tougher to get that effect."
But audience fragmentation does mean networks must work harder, Williams
says. "We have to be more creative about it, we have to raise the bar on
how we reach out and engage our viewers, because it's not automatic any more.
"But I absolutely believe there's a strong future for conventional
television amongst all the other entertainment offerings," she says.
================================
George Antunes, Political Science Dept
University of Houston; Houston, TX 77204
Voice: 713-743-3923 Fax: 713-743-3927
antunes at uh dot edu
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