Live from ad:tech – TV 3.0 – The Death of Television Networks as we Know Them

“Not only is the advertising industry somewhat desperate looking around the corner into 2009… Not only will advertising revenues go down, viewership will continue to disintegrate and go places where there isn’t any advertising.” – Peter Price, President and CEO, National Academy of Television Arts & Sciences

TV networks, like most traditional media outlets (magazines, newspapers, radio), are in rough shape right now… live viewing audiences are dropping with the growth in digital video recorders and alternate viewing channels, like the internet, which show either no or limited ads.  What does this mean for the networks?  How will they change and adapt their business models to survive this new reality?

What exactly does TV 3.0 mean?

“The first I heard of it (TV 3.0) was when I was invited to this panel”, responded Michael Steib, the director of TV Ads at Google (I appreciate his acknowledgement of the made-up buzz word). In TV 3.0 there is a proliferation of channels, people are watching TV in different places (online, DVR, etc) and at different times. Connecting advertisers and audiences as people start to watch TV in new and different times and places.

Sooooo… you have to ask – what role does “traditional” or “linear” TV play in this new space? According to Stacey Lynn Schulman, Senior VP of Turner Entertainment, Ad Sales Research, Turner Broadcasting, there is an ecological system that surrounds the content. The content exists in many different places and they all interact together differently.

When you look at all the different ways that TV programs can be consumed, are they actually converging? Content must be served in a contextually relevant format. For example, sports. When you look at fantasy sports, all of the different devices are increasing consumption and expanding the # of interactions. As someone participates in fantasy sports, they tend to watch more sports, they track the stats online while they watch and they track the scores on their mobile devices. The usage is increasing because of the breadth of the options and how participating in something like fantasy sports leads to growing media consumption.

Another opportunity to look at the ecology or opportunities that multiple platforms can be seen in the recent interest in music associated with certain shows. The networks noticed that people were talking about the songs that they were hearing on shows such as The OC, Grey’s Anatomy and Desperate Housewives. These tracks are now available online to buy and listen to, which increases the total interaction with the show.

The Billion Dollar Question

How are TV stations going to make up the ad revenue that is lost by DVRs and those who watch online? Online television does provide advertising opportunities that are more targeted may have better metrics, however there are fewer ads, which don’t make up for the losses from traditional media. The panelists agreed that all forms of traditional media are in trouble….

Anthony Soohoo, Senior VP & GM, Entertainment, CBS Interactive said that they think of themselves as an “audience network” and not just a TV network. As content becomes more ubiquitous and there are more outlets the TV networks have to interact with audiences beyond traditional television.

Here is the billion dollar question: will TV networks be able to make up the ad revenue lost from the shift away from traditional TV? People will watch 400 billion hours on their TV and watch 10 million hours of online video – online is still a small segment. For networks to stay afloat, they need to either increase the # of ads 4x vs. what they are showing now, or increase the effectiveness. The solution? Technology. Technology can be used in 2 ways to help solve this problem. The first is better targeting through technological solutions. The second is by using technologies to improve the effectiveness of the interaction or ad that is served (ie. rich media).

Advertisers are finding new creative ways to get to consumers – they won’t stop running 30 second ads on TVs BUT many of the ad dollars will go somewhere else.

And on the Economy?

No panel on any topic would be complete without a short discussion on the economy – that black cloud hanging over our heads. Budgets are largely in-tact for 2008 however drops are expected for 2009. Marketers are looking more to stretch their budgets and drive efficiencies vs. making large cuts. Specifically, digital continues to grow but some more “experimental” channels or websites (like mobile) might be facing difficulties due to the perceived risks.

What do you think?  How will the TV networks (and marketers) adapt to the changing landscape?

– Krista Neher