I’m not being dramatic when I say this, but there are some seismic changes about to happen to the advertising model. If I owned a TV network, a media agency or indeed an advertising agency, I’d be either making plans to change the business or sell up and retire before it goes to shit.
We can of course deny it’s happening, but the signals are already here.
First of all people do other stuff in the adbreak. We all know this, but it’s interesting to see the data emerging. It doesn’t matter how awesome our beautiful pieces of film are, if people are spending the adbreak doing their online banking it isn’t really money well spent, despite all the awards we may get.
Adding to this, it’s also fair to say that the data a bank can generate from its huge customer base like Commonwealth Bank is far more robust than how TV is currently measured. Why brands still put up with paying for media based on such an out of date model is beyond me.
Ignoring ads is however only the tip of the iceberg.
I can guarantee you in the next few years there will be more people cancelling paid subscription TV in favour of just paying for the content that they want, potentially even directly to the production company and without the ads.
One million people in US supposedly cancelled paid TV last year in favour of alternatives like Netflix. This is the first time there has ever been a decline in this model.
Looking closer to home in Australia, we recently ranked 3rd Globally in terms of illegally downloading the first episode of Games of Thrones season three, but were top on a per capita basis. This doesn’t mean we our Nation of pirates per se, it is simply the only way you can get it, without having to pay for a full 12 month Foxtel package with movies or wait for it to become available on DVD or iTunes
I’m sure that many companies in Australia are just relying on the Government to intervene by banning access to companies like Netflix as they do now, but this unfortunately only does two things.
One – increase the rates at which people download content illegally. This obviously isn’t that great for the companies that make the content.
Two – Imagine if Netflix created a political documentary rather than fiction such as House of Cards. At what point does this become censorship rather than protecting industries in Australia? It’s pretty murky territory and not one I can see being a long-term fix to the problem.
Then there is the latest Nielsen data that highlights 33% of homes in Australia now have a connected TV. If you look at the growth curve and our history of rapid technology adoption, connected TVs will be the majority rather than the minority within the next couple of years. When this happens the power shifts dramatically from TV networks to content producers. They no longer need networks, they can sell content directly to a global audience connected through one global pipe.
Even thinking about sports properties. The organisations that own the rights don’t have to put them out for auction, they can sell them directly to the individuals.
The only undefined question will be whether or not companies like HBO will want to keep the advertising model, or simply maintain a position of delivering quality content to people willing to pay a premium.
As with most things it will probably be a hybrid. Free content/channels will still be available and supported by advertising but the quality of audiences will drop considerably as a result. It will be very similar to cheap digital adexchanges scrapping around for enough impressions to make it worth while.
It’s not all bad for brands, it just means they will need to be more imaginative in the way they reach people. Companies like Red Bull will laughing at all their competitors fixated to the current model. Imagine all those assets and content available that could be piped straight into the living room with zero media spend.
In fact they may even charge for it – advertising people pay for, now there is an interesting thought.