The fall of the traditional advertising model

There are exciting changes in the broadcast/cable industry that are challenging traditional business models. Today I wanted to share with you a few of these disruptive ("black swan") paradigm shifting changes. Whoa! That's a mouthfull!

New technologies such as IPTV and Mobile are targeting content delivery at the place and time of the viewer's choosing. That's the reason DVR (time-shifted viewing) is gaining so much popularity (according to CAB current DVR penetration is 17% projected to reach 22% in the next 5 years, source: CAB 2007 Research Snapshot).

Another interesting trend is the decline of broadcast viewership vs. Ad supported cable (see CAB's 2007 TV Facts "Long Term Total TV Household Share Trends"). Time shifted viewing and alternative distribution channels (such as mobile and web) are increasingly widening the gap between Network and Cable.

The difficulty with new delivery platforms is that in order to create the content there has to be a clear revenue stream, and that stream is constantly declining as advertisers discover alternatives to traditional TV advertising.

Currency Changes

For the longest time viewership was measured uniformly by sampling "attendance" during the airing of a live show. This method gave birth to the "Nielsen Family".

Then there is time shifted viewing and the difficulties it has created in measuring viewership: The market has recently moved on to a new currency (Nielsen Live+7) which averages live program viewing plus 7 days of DVR. Commercial sponsors (Advertisers) have also realized that a highly rated show may not deliver the promised number of eyeballs so an additional currency was recently created: C3 ("Nielsen C3, At Long Last", Broadcasting & Cable). The core problem introduced by time shifting can not be solved, however, by either of these new currencies. The question "are people watching my commercial?" needs to be subplanted by the question "are they engaged and will they buy my product?".

The gizmos that are filling our lives are about to take us one step closer to the advertising holy grail: firstly deliver engaged viewers but ultimately the advertisers are going to want to know if and when the viewer becomes a customer.

In the near future metrics for measuring TV viewership will be readily available to content providers and content distributors via technology such as IPTV: Internet Protocol TV. This technology leverages high speed connectivity to deliver broadcast content diectl to the viewer. So what's the excitement about seeing TV/Cable on my desktop, you ask? Some TV set manufacturers are building internet conenctivity into their sets so the experience of internet based content will relocate back to the primary viewing location - the couch.

It is yet unclear which technology will win the consumer's thirst for entertainment. Will be an internet connected TV a-la Sony LocationFree TV? Will it be a new and improved Tivo-like device? Will it be our Cable Box, albeit a smarter one?

No matter what technology wins, the impact on the industry as a whole (advertisers, broadcasters and service providers to both) is rapidly changing as the currency for measuring audiences transition from sampling to interactive live-data from viewer to broadcaster: much in the same way that a website author can know how many people are view each of the pages on their site - so too can IPTV broadcasters know who is watching their content and what channels are they flipping to.

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