For those of you interested, here's a paper I recently wrote on trends in tv viewership for my Writing for Business class. Warning: It's a little long. Enjoy!
It took twenty-six years for television to reach a quarter of the US population. For cell phones, it took thirteen years; for the Internet, seven. But for full episodes of TV online, it only took one and a half years.[1] These staggering statistics indicate that people are increasingly willing and able to embrace new methods of media consumption. Between television programming online and DVR(Digital Video Recorder) usage, the U.S. population is adapting to new media outlets so quickly that the world of broadcast TV has been turned upside down. Because this change came on so suddenly, the industry is having a difficult time figuring out how to properly monetize new television outlets. In addition, this transition goes beyond economic effects, changing the cultural landscape of TV viewing from a group activity to an individual experience. If nothing else, the change in viewing habits has demonstrated that consumers expect two things: convenience and control. These expectations have created a movement away from broadcast television to strictly on-demand viewing. The need for on-demand television programming will continue to increase online viewership and DVR usage, resulting in dramatic economic and cultural effects.
Television on-demand is just the next step in a movement away from broadcast television that has been evolving for decades. As long as it has been in existence, television has been a form that has relied on advertising dollars for sustenance. And as the television market has changed, the model for monetization has become more precarious. In 1960, there were an average of 5.7 television channels in the United States, all of which had large audiences and ample opportunities for commercial activity. As of 2008, there were 1353 stations, including over 500 unique cable channels and hundreds of network affiliates, giving endless options for channel surfing to consumers.[2]
By 2008, the scope of channels became so wide that it was increasingly difficult for advertisers to capture their desired audiences. And as advertising space became less effective, the price advertisers were willing to pay decreased, and consequentially less money was available for programming costs and the development of the shows themselves. Simply put, as fewer people were watching individual channels on broadcast television, broadcast television became increasingly unable to sustain itself. But this mass production of channels and segmentation of audiences was just the beginning of a slippery slope for television’s traditional business model.
Following the increased segmentation of television audiences came the infiltration of online television and DVR usage. The availability of on-demand television through the Internet has huge economic implications for the advertising industry and the future of broadcast television. It is undeniable that there has been an online video viewer explosion. As of 2003, 19% or 52.3 million people were watching television online; as of 2010, the number has increased to 53% or 157 million. And that number is only growing; within seven years, adults 18-39, which historically has been the prime advertising demographic, will consume 80% of their TV viewing on-demand mainly through online resources. These numbers are displacing consumers from broadcast television: between 2005 and 2006 the number of people watching television decreased 10%, which is an alarming statistic for a market that has constantly been growing since its inception.[3]
As a result of these statistics, companies will continue to refocus their advertising energies away from television to the online market. For many years there has been a negative stigma attached to online advertising, but as regulation improves and online television viewing becomes more standardized, its benefits are becoming increasingly apparent. This is best exemplified by the website Hulu, which launched in 2008. The site, which legally offers full episodes of television online, serves the advertisers by making it impossible for viewers to skip over commercials. In addition, Hulu implements the same commercial throughout the program, increasing product retention for the viewer. Additional characteristics, such as polling on commercials, increase consumer involvement and interactivity. The benefits of advertising through online television are catching on: while the online market is only $6 billion, a fraction of the $70 billion broadcast television market, it experienced an 89% increase over the previous year. [4]
Advertisers are looking to other media as appropriate venues not only due to online viewing, but also DVR penetration. For advertisers, the principal negative consequence of DVR proliferation is the increasing scarcity of viewer attention. In the past year, DVR use has increased nearly 90%, and now has a presence in 30% of US homes. Some may argue that the commercials really are not losing the penetration, but owners are using the skip function: DVR users skipped commercials during 68% of recorded programs, and that number will only increase as DVRs become more user friendly.[5] The fact that 68% of DVR users are skipping over commercials that the advertising industry spends $70 billion a year investing in has huge implications for future trends in online advertising. DVR use will likely accelerate current trends towards “un-skippable” advertising such as product placement, branded entertainment, and program sponsorship. However, these techniques seem likely to reach limits of consumer acceptance and cannot completely be relied on as a replacement for traditional advertising methods.
The trend towards on-demand viewing has completely changed the cultural significance of television. Once content broke free of the schedule, nearly all established ideas about how people watch were called into question. Traditionally, by having a sequenced flow of programming, networks could capture audiences for extended periods of time. But as technology has evolved so have our viewing habits. Devices like laptops and iPods free television content so we can easily access it in other locations on our own time. This, in turn, has resulted increased solo television viewing. The shrinking screen size of portable television is eroding the family audience and re-enforcing the rise of programming directed to niche tastes.[6]
Despite the evidence that speaks to a future exclusively of TV on-demand, one segment of broadcast TV is experiencing growth: live events that facilitate a national shared experience. Certain programming, such as sporting events and breaking news, are dependent on live broadcasts. In fact, live viewing of sporting events has hit an all-time high: the 2010 Super Bowl had 106.5 billion viewers, and dethroned the long standing record held by M*A*S*H’s 1983 season finale. How do we explain this increase? Like award shows such as the Oscars, Grammys, and Golden Globes, which have recently seen a ratings revival, the Super Bowl qualifies as a "shared experience event." [7] We all seek ways to identify with other people, especially since the increase in online activity has created a feeling of isolation. The Super Bowl is cheap entertainment that creates a national connection, which is especially essential during these hard economic times. In addition, in times of crisis, the entire nation turns to news broadcasts, which facilitates a sense of national unity that cannot be created by any other media form. While the phenomenon of the entire nation watching a live broadcast may be an important aspect of our culture, these two forms alone are hardly enough to sustain the broadcast market. Other popular methods of live viewing are readily available through online streaming and other technologies.
Another competitor to exclusively on-demand programming is the casual viewer. Not all viewers go to the television with the intent to watch a certain program; some just scan the TV out of boredom and will watch whatever is on. It can be argued that changing to a completely on-demand format would take away the comfort of continuous programming that consumers have relied on for decades. However, with new platforms for on-demand viewing, surely there will be setups to accommodate for this. Through show recommendations and categories for browsing, inevitably a format will develop which maintains the sense of leisure achieved through casual viewing.
With so many different forms of on-demand viewing under development in a very unstable marketplace, it is hard to tell exactly where the market is heading. The technology for these changes is readily available; it is just a matter of finding a stable business platform for monetization. There are different methods currently being tested that speak to the future of on-demand television. CBSTV.com is testing a credit system for watching ads, in which viewers can watch a series of ads to earn ad-free viewing later. In addition, Tremor Media launched vChoice, where viewers can choose which ads to watch, view product demos, and play product sponsored games all without leaving the video player. A technology called Telescoping allows viewers to jump from an interactive ad to deeper information, giving the consumer the ability to learn more about a product with just the click of a button. In addition, in the future we could expect on-demand, customized TV where only selected channels are delivered to each subscriber. This type of programming could be funded by the creation of targeted ads that are served up based on users’ preferences and viewing habits.[8]
Because the need for convenience and control has driven on-demand viewing, broadcast television will continue to see an overall decrease in ratings. This change has extreme economic and cultural repercussions, and advertisers will continue to migrate to alternate methods to accommodate for changes in the industry. But with the massive disruption of business models, there are massive opportunities for growth and monetization. Advocates of broadcast television need to look to the future of media consumption and acknowledge that change is inevitable.
[1] Pam McNeely, “The Digital Evolution.” A presentation by Tantara Media Partners at The University of Southern California. November 3, 2009.
[2] Lotz, Amanda. “What is U.S. Television Now?” Annals of the American Academy of Political and Social Science 625 (2009): 49.
[4] McNeely, “The Digital Evolution.”
[5] Kenneth Wilbur, “How the Digital Video Recorder (DVR) Changes Traditional Television Advertising,” Journal of Advertising 37, no. 1 (2008): 143-149.
[6] David Waterman, “The Economics of Internet TV: New Niches vs. Mass Audiences,” The Journal of Policy, Regulation and Strategy for Telecommunications Information and Media 3, no.3 (2001): 215-229.
[7] “Super Bowl dethrones 'M*A*S*H,' sets all-time record!” The Hollywood Reporter, 8 February 2010. <http://www.thrfeed.com/2010/02/super-bowl-xliv-ratings-.html>
[8] McNeely, “The Digital Evolution.”
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