The crazier predictions about the advertising business – and there have been plenty of those – have not usually come true.
The VCR hasn’t destroyed television advertising. We have yet to see ‘one-to-one’ communication with consumers through their televisions outside of small test studies. And nobody has yet come up with a workable, practical, commercially viable ‘passive’ device for measuring television audiences (personal people meters notwithstanding).
But there is reason to believe that advertising as we know it could be about to face its biggest challenge yet. The causes are rooted in the continuation of long-established trends: the proliferation of media outlets, audience fragmentation, unprecedented advertising clutter and improved technology giving more control to the viewer.
Just look at the evidence in the U.S.: At last count there were 2,600 television stations, over 300 national television networks, more than 13,000 radio stations and some 18,000 magazines.
The average U.S. household, according to Nielsen Media Research, receives 89 TV channels. Of 2,200 programs registering a rating nationally every week, fewer than 25 achieve an average audience greater 5% of the adult population. The vast majority reach less than 1%.
Traditionally, at the heart of the TV world lies the primetime schedules of the big network broadcasters – originally ABC, NBC and CBS – but now also Fox, UPN and The WB. Trouble is, this model is breaking down fast.
Back in 1980, primetime viewing to the then three broadcast networks accounted for an 88% share of the daypart and 25% of all television viewing minutes. The average program in the top 10-ranked shows that year was tuned into by a quarter of the nation’s households.
Fast forward to 2002. The same three networks managed a 38% share of prime time viewing in the latest program season – just 9% of total viewing minutes. The average top 10 program was seen by only 13% of households.
Broadcast primetime, in short, has moved from a position where it reached almost all of the people most of the time, to one where the best that can be said is that it reaches most of the people some of the time.
Looking forward
If today’s reality challenges the traditional primetime model, tomorrow’s threatens to destroy it completely. Digital television is fast becoming the normal way to receive signals, bringing in its wake a number of new technologies.
By mid-2002, more than a third of U.S. households received television signals digitally – either by cable or satellite. This offers both greater channel choice and the infrastructure for new technological gizmos like personal video recorders (PVRs), interactive program guides (IPGs) and video on demand (VOD).
Consensus opinion predicts that around 40% of homes will have the ability to record programs digitally or search for something to watch interactively five years from now.
Research published by TiVo, a leading PVR operator, has shown that as much as 80% of the time, programs are watched at a different time than they are scheduled. Other research has confirmed that PVR users skip ads most of the time.
Extrapolating even part of these findings to a possible 50% of the household population five years from now seriously undermines current assumptions about the power of primetime television.
For example, Friends delivered an audience rating of 12 in late September. If, as the TiVo research found, 86% of viewers watched this particular show in time-shift mode, all would have the ability to skip commercials as they watched (assuming the PVR enabled this function, as TiVo does). Even if only 50% of them did so, the commercial rating would be closer to a 7 (86% x 12 rating = 10.4; 50% (skip commercial) x 10.4 = 5.2; add to ‘live’ rating (1.7) = 6.9).
Friends is one of the top rated programs in America. If the best a regularly scheduled show can achieve is a 7, fragmentation will have left very few recognizable pieces of the mass audience for advertisers to pick from.
This is a big challenge for audience researchers. The current national U.S. people meter sample stands at around 5,000 households. With a little under 2,000 of the 2,200 programs broadcast nationally every week already capturing less than 1% of household viewing (i.e. a sample of less than 50) and a great deal of negotiation going on at rating levels recorded to the second decimal place (half a household!) the situation is already dire.
Andrew Green
Managing partner, director of communication insights
OMD USA, New York
andrew.green@omd.com
