Over the past several years the percentage of consumer time spent watching television and the percentage of advertisers budgets spent on television have matched each other fairly well. Last year (see blog post) 43% of media consumption time was spent on television and 42% of ad budgets were spent on television. But there are signs that perhaps television advertising is about to become a victim of new technologies, too.
This chart is from Citi and it’s referenced in a very interesting article on Business Insider. Here is what Henry Blodget writes based on his own experience:
In our household, as in many households, television consumption has changed massively over the past decade, especially over the past 5 years.
- We almost never watch television shows when they are broadcast anymore (with the very notable exception of live sports)
- We rarely watch shows with ads, even on a DVR
- We watch a lot of TV and movie content, but always on demand and almost never with ads (We’re now so used to watching shows via Netflix or iTunes or HBO that ads now seem like bizarre intrusions)
- We get our news from the Internet, article by article, clip by clip. The only time we watch TV news live is when there’s a crisis or huge event happening somewhere. (You still can’t beat TV for that, but soon, news networks will also be streamed).
- We watch TV and movie content on 4 different screens, depending on which is convenient (TV, laptops, phones, iPad)
He further writes:
What is the shift in user behavior likely to do to the TV business?
- The traditional “network” model is likely to break down and be replaced with far larger “libraries” of content and far more efficient content production, acquisition, and distribution. Some of the content produced by networks will still be consumed (and, therefore, produced), but the idea of getting “affiliate fees” and selling advertising for each of dozens of branded networks seems absurd. This change is already occurring, of course: Traditional networks are being replaced by Netflix, iTunes, and uber-networks like “NBC Universal” and “Time Warner.” There is so much money in the network business right now that, initially, this shift won’t mean much. Over time, however, it will. Unprofitable networks will be merged with profitable ones. Unprofitable shows and overpaid talent will be cut. Overpaid managers will get fired. Production costs, on aggregate, will drop. Sets, crews, newsgathering, etc. will be consolidated. The fat will get squeezed out of the system.
- The cost of traditional pay TV will have to drop–users will have to get more for less, or they’ll stop paying for much at all. I might value the TV content we get through our cable company at $20 a month–about 1/5th of what we pay for it. Eventually, as soon as I can figure out ways to get the few sports I watch another way, we’ll stop paying the $100.
- Ultimately, the distinction between “TV” and other forms of video content will disappear. We’ll pay some distributors for bundles of that content, we’ll buy some of it directly, and we’ll get some of it for free. But a lot of the money that is currently being wasted by us and to reach us will be spent much more efficiently.
Bottom line, as it has in newspapers, the TV business is going to have to get radically more efficient. It won’t disappear–newspapers haven’t disappeared–but the fat and happy days will have to end.
As for the other question, “when,” the answer may be “now.”
It’s a good read.