Monday, October 31, 2016

The future of television: plotting its comeback

Television was supposed to be dead by now, killed by the internet. Yet as we enter the eighth decade since its mass adoption as the primary form of home entertainment, the glowing box in the living room is showing that rumours of its demise may have been premature.
In the past few years the increase in the popularity of streaming services such as Netflix, together with a shift by younger viewers towards digital platforms such as Facebook and Instagram, has hit TV audience ratings and advertising revenues.
Still, for the main US broadcast networks, 2016 is shaping up to be a solid year.
Like many commodities, television advertising in the US is sold via a futures market — the upfronts — where advertisers can lock in prices for the slots they buy. There is also spot buying, known as the “scatter” market, where unsold inventory is auctioned off throughout the year, and where price moves dependent on demand.
This year, concerns about whether the ads are being viewed and measurement of digital advertising sent brands scurrying back to the relative safety of broadcast television. Les Moonves, the chief executive of CBS, summed up the situation earlier this year. Broadcast television remained “the single best and most effective medium” for brands, he said. Digital advertising “sometimes lacks accuracy and credibility … as a result, there is a clear shift in advertising back to network television”. That shift resulted in significant gains for CBS and rival networks with this year’s upfront as much as five percentage points up on last year’s sales. Across cable and broadcast, total sales were close to $19bn.
But when data were analysed in the second quarter of the year the picture was less rosy. “TV’s share gains look fleeting,” Michael Nathanson, an analyst with MoffettNathanson, wrote in a recent research note. “The narrative of TV taking back share from online could start to unwind.”
In cable television, the advertising picture is not particularly clear. Some networks, such as Turner Broadcasting, which is part of Time Warner, have taken steps to run fewer ads on channels in order to retain viewers and offer advertisers more prominence and less clutter, as well as supporting ad rates in a weak market. After fewer ads ran on Animal Kingdom, a new drama series from Turner’s TNT network, the company says the ads were more effective because viewers were more likely to remember the brand and to say they would buy a product or service. 
The pace of television advertising innovation has been faster in the UK. Sky, the UK pay-TV group in which Rupert Murdoch’s 21st Century Fox owns a 39 per cent stake, has developed a proprietary targeted advertising system that means one Sky customer could see one set of advertisements in its programming and the house next door could get another.
The technology has created new revenues from brands that want to target a particular region, or from local companies, such as car dealers seeking to market special offers to a defined location.
These campaigns can generate “three or four times what we would charge just through a standard, untargeted ad”, Jeremy Darroch, Sky’s chief executive, told the Financial Times earlier this year. He wants to bring the technology to the company’s other territories, such as Germany and Italy.
In the US, a consensus is emerging about the future of the costly packages of channels, or “bundles”, which are distributed and sold by cable and satellite operators. For decades the bundle has generated billions of dollars for media companies but there are signs that consumers are losing patience with having to pay for channels that they may not want. Many have “cut the cord” and cancelled their subscriptions in favour of cheaper, lower cost alternatives such as Netflix.  
Such services are built around on-demand programming: viewers watch what they want, when they want. But there is still interest in the more passive experience of watching scheduled TV — “lean-back” viewing — which explains why so many efforts are under way to create cheaper packages of channels to be delivered to viewers digitally.
Hulu, an on-demand streaming service whose owners include 21st Century Fox and Walt Disney, is at work on such a service, as is YouTube, the world’s largest video site. Pluto TV, a free internet service that recently raised $30m, is also betting on audience interest in a viewing experience that isdelivered digitally but resembles television. “One of the things [TV] has got right is it makes it easy for you to get a broad range of viewing options in one place,” Tom Ryan, chief executive, recently told the FT.
This new wave of digital services is part of TV’s evolution. The medium is about to turn 70, but there is clearly life in it yet.

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