The strategic choice for television is to either compete with digital media or become digital. On the consumer side, digital delivers video on any device at any time. On the business side, digital provides addressable targeting, real-time buying, and response tracking of outcomes.
Traditional television still retains some advantages over digital. Traditional television provides fast reach with complete videos on full screens without fraud. If television publishers view TV as Total Television instead of just linear, they can win. As this viewpoint argues, television publishers with direct-to-consumer distribution have the winning hand if they move fast.
Everyone knows that change is here. Current television publishers have three major revenue sources: ad dollars, program licensing and retransmission fees. Their business model is business-to-business, selling bulk audiences. Now that digital has given consumers the power to pick and choose, the value of bulk communications is decreasing while the value of individual communications is increasing.
The simplest strategic adjustment is to change revenue and profit calculations from monetizing programs to monetizing individuals. Television publishers have to go beyond the US by monetizing international subscribers. Digital companies think globally.
Television publishers are moving too slowly. As of last September, only 40% of US homes had addressable infrastructure. Inventions to fill this void are pouring in. They cover infrastructure (Smart TVs, Roku / Apple TV-type boxes, and enabler apps) and content (Netflix, Hulu, Amazon Prime, and ESPN+). Native digital content like YouTube, Twitter video, and now Facebook video are also circling with appetites for subscriber ad dollars. All these inventions are accelerating the movement from linear to digital television.
Once television publishers start selling and communicating directly with their consumers, they can solve derivative issues like ad loads with individualized algorithms to optimize consumer revenues, balancing the value of ads with subscriptions and making this a consumer choice.
Expect measurements to change too. As digital video solves for viewability with second-by-second tracking of the ads exposure with screen size and fraud accounted for, they will increasingly create pressure for a new second-by-second opportunity to see metric for all video, including television. Since the panel sizes necessary for individual seconds will not be affordable even when limiting the reports to demographics, hybrid techniques of census tuning panels with calibrating persons viewing panels to predict who is tuning will be required. Are consumers actually looking at the television every second? This applies to content and ads.
Television publishers (need to) transform their business models and regain dominance through direct to consumer models, leveraging their market advantage in content. They need to hurry, because Netflix smells blood and is investing heavily in content to strip television publishers of this advantage.
Source: Green, M. (2018, August 27). The Strategic Choice for Television. martechpartner.com.
Editor’s Note: This is the first of two commentaries from industry voices that propose strategic changes in media – this one covers Television, next week will focus on Print/Digital.