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  • Have on-demand services killed off scheduled TV?
  • Have on-demand services killed off scheduled TV?
    Britt-knee, Creative Commons (2011) ©
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How the internet is changing the television industry

With on-demand services thriving and viewer numbers falling, is the golden age of TV over? Canvas8 spoke with Alan Wolk, author of Over the top: How the internet is slowly (but surely) changing the television industry, about how TV will adapt and whether the traditional ad model will survive.

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Does anyone still watch live TV? With on-demand services proliferating and TV viewer numbers in steady decline, what does the future hold for this medium? In his new book, Over the top: How the internet is slowly (but surely) changing the television industry, futurist Alan Wolk discusses what’s driving change within the industry, how the medium will adapt to keep up with evolving viewer habits, and what this means for television’s traditional revenue source – interruptive 30-second ads.

According to a recent survey, the number of people watching live TV in the US has decreased by 12% year on year, a pattern similar to that seen in Britain. [1] This trend is magnified for 18- to 24-year-olds, who now watch 45 minutes less television per day than they did in 2014. [2] Meanwhile, 40% of households in the US subscribe to some form of on-demand service like Netflix or Amazon Prime. [3]

But what does this mean for traditional television networks? Should they be scrabbling for a foothold in the on-demand market or will there always be a place for live TV – flopped on the couch, remote-in-hand kind of TV – in our lives?

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Interrupting the ads
Revenue from advertising has provided TV networks with a lucrative cash flow. But is the power of the 30-second ad diminishing in the digital age? A study from 2014 found that 60% of people download TV programmes to avoid adverts, with second screening further muting the impact of any that are endured. [4]

“When people are watching DVR there is the assumption that they are fast-forwarding through the ads and when they’re watching VOD there’s not as many ads so it’s dramatically cutting into the budget. But the rates that are being charged for TV advertising are still based on the previous viewing numbers when there were more live viewers,” says Wolk, pointing out that the prices commanded for commercial spots have not yet been adjusted for the diminished audiences seeing them. [5]

Wolk proposes a few ways that advertisers can adapt their model to accommodate the growing intolerance of ad breaks that’s being fuelled by services like Netflix. He suggests native advertising and branded content as a more subtle way for brands to attract consumers’ attention. “The trick, as always, is to make sure that the ‘content’ part is more important than the ‘branded’ part, so that what is produced is something people actually want to watch, not a 15- or 30-minute infomercial,” writes Wolk. [6]

Branded promotions are another option, he says. “The ‘halo effect’ of being associated with a viewer’s favourite programme can be valuable to brands. The bigger and more active a show’s fan base is, the more valuable it is to potential sponsors.” [6]

When people are watching DVR there is the assumption that they are fast-forwarding through the ads and when they’re watching VOD there’s not as many ads so it’s dramatically cutting into the budget

Alan Wolk, futurist

He cites the example of Target devoting a coveted 4 minute ad spot during the Grammys to live stream an Imagine Dragons concert instead of a traditional promotion. The retailer’s restraint – references to Target were subtly made through the branding of the stage – went down well with viewers. The reaction to the ad was overwhelmingly positive, with the hashtag ‘#MoreMusic’ trending at number one on Twitter in the US. Branded content and native advertising remove the disruptive element of regular commercials, making viewers more likely to engage. Advertisers have caught on to the benefits of going native, prompting a spike in the amount spent on this type of advertising from almost $5 billion in 2013 to an expected $21 billion in 2018. ‘Social native’ advertising that includes promoted tweets on Twitter and suggested Facebook posts is expected to grow the fastest. [7]

“If interruptive advertising is to still have a place in this new ecosystem, it will need to become much less intrusive and far more targeted,” writes Wolk. “This is already becoming a reality through Sky’s AdSmart and 4oD’s targeted advertising tech. The result will be fewer but more relevant commercials, a combination that may actually convince viewers to stick around for the commercial breaks.” [8]

Viewers might be happier with targeted advertising too. An IAB study found that over 50% of people preferred seeing more personalised and relevant adverts online, a sentiment which is likely to translate to TV advertising as well. [9] Wolk predicts that personal TV logins will mean that our program and ad viewing habits can be tracked, providing information about what kind of ads we would find useful.

Can personalised adverts get TV viewers to pay attention? Can personalised adverts get TV viewers to pay attention?
Lyle Vincent, Creative Commons (2008) ©

Non-traditional channels
A new generation of content creators are making their work directly available to the public by uploading it to YouTube or other multi-channel networks, bypassing the middlemen at established studios and networks. A marketing push – usually carried out by networks – can be achieved via social media if the content creators already enjoy a strong online presence.

This approach is embodied by Young Hollywood, a network which has chosen to deliver celebrity news and entertainment through YouTube, Hulu, Roku and an Apple TV channel in favour of traditional cable networks. It’s signed up Subway as a sponsor, and has tellingly opted for branded content rather than traditional ads to promote the fast food joint. As for YouTube stars, Variety found that they were better recognised by teenagers than other young Hollywood actors like Jennifer Lawrence. [10] And Vine star Cameron Dallas shot straight to the top of the iTunes charts with his hastily produced Christmas film debut. [11]

Networks are realising that using social media is how to promote shows now. Many are struggling to promote their shows because they used to rely on the fact that someone would be watching three hours of live TV in the evenings and see their promos

Alan Wolk, futurist

The democratisation of the television and film industries is possible thanks to the power now vested in fans via social media and the internet. “A lot of networks are realising that using social media as a driver is how to promote shows now,” says Wolk. “Many are struggling to promote their shows because they used to rely on the fact that someone would be watching three hours of live TV in the evenings and see their promos. They’ve realised that a show that has a very loyal fanbase is better than ‘meh’ TV that we really don’t care about but will get big numbers when it’s on, like American Idol.” [5]

So what shows are still doing well? “Shows that have these really strong fanbases like Community or Veronica Mars really can be kept going for years,” says Wolk. [5] Emblematic of this newly discovered people power is the revival of Veronica Mars for the big screen, achieved by fans donating through a Kickstarter fund.

A social media presence gets viewers more invested in a show A social media presence gets viewers more invested in a show
Wheeler Cowperthwaite, Creative Commons (2014) ©

Insights and opportunities
Data will drive the television industry to a new frontiers, not just in terms of targeted advertising but also in terms of programming decisions. More real time information about TV viewing will give content creators unprecedented information about how audiences respond to their programmes. When might people turn off and why? Wolk cites the example of sports programming where variables like different types of shots and number of replays might garner more or less favourable audience reactions. This type of feedback can facilitate programming decisions which improve the viewer’s experience.

But could access to this data potentially suppress creativity and originality in favour of content that has been shown to test well with audiences? “We’ve seen this in Hollywood before where focus group really likes X so let’s do X,” Wolk says. “I mean how many dinosaur movies did we see after Jurassic Park? So there’s the tendency to just look at that data and go in that direction rather than saying ‘OK, this is interesting. What do we know about this?’” [5]

“The reality is that something really new and creative rarely does well with audiences because it’s unfamiliar and people don’t like that so it takes time to grow on them,” he adds. “We’ve seen this happen with shows that were slow to get a response initially but by their third or fourth season were smash hits.” [5] Can networks be trusted to use this growing wealth of data responsibly?

Different options will co-exist because it depends on the person and their mood. There’s people who like to make playlists and people who like to listen to radio but not everyone is 100% in each camp

Alan Wolk, futurist

Wolk predicts that the future of TV lies in a model similar to Spotify. “If you look at music streaming services and what the options are, I think we’re going to see that in television,” he says. “Most stuff will be available on demand but there will be plenty of times when you don’t want to be the DJ and you just want to sit back and say ‘what have you got for me?’” [5]

“Different options will co-exist because it depends on the person and their mood. There’s people who like to make playlists and people who like to listen to radio but not everyone is 100% in each camp,” says Wolk. [5] He guesses revenue would be supplied either through dynamically inserted ads or through a subscription-style fee that allows the user to watch content without ads.It might be commonplace for viewers to be given the option between a basic, ad-supported TV package and a premium, ad-free service. In fact, online streaming service Hulu might soon be offering customers exactly that choice. [12]

Laurie Clarke is a Psychology graduate currently based in London. She is obsessed with what makes people tick, especially when it comes to how people make decisions.

Related behaviours
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Living the Dream: Welcome to the age of the micro-celebrity.

Sources
1. ‘Cable TV viewing declined by more than 12 percent in January’, Gigaom (February 2015)
2. 'Are young people watching less TV? (Updated – Q1 2015 Data)', Marketing Charts (June 2015)
3. 'Fewer people than ever are watching TV', Time (December 2014)
4. ‘Why the C3 V. C7 debate in TV advertising may be irrelevant’, The Wall Street Journal (May 2014)
5. Interview with Alan Wolk conducted by author
6. Over the top: How the internet is slowly (but surely) changing the television industry, Alan Wolk (May 2015)
7. 'Spending on native advertising is soaring as marketers and digital media publishers realise the benefits', Business Insider (November 2014)
8. 'When Netflix and other on-demand services killed the TV ad golden goose', The Guardian (February 2015)
9. 'Personalised ads are here to stay but brands must beware 'freaking out' consumers', Marketing (May 2015)
10. 'Survey: YouTube stars more popular than mainstream celebs among US teens', Variety (August 2014)
11. 'Cameron Dallas’ Expelled movie tops digital sales charts in first day of release', Variety (December 2014)
12. 'Hulu explores adding ad-free option to its service', The Wall Street Journal (July 2015)

Author
Laurie Clarke