Mid-Season Report: Don’t touch that dial
February 26, 2014 | Kristin Laird | Comments
Broadcasters standing strong, holding onto audiences and ad dollars
Back in January, Fox chairman Kevin Reilly made headlines when he announced his network would balk at that traditional springtime ritual where the studios scramble to produce and pitch shows that networks buy and present to advertisers at the upfront schmoozefests in May.
In saying no to pilot season, Fox broke with the traditional broadcast calendar, opting instead to produce pilots and launch shows throughout the year. At future upfront presentations, the plan is to focus on the strengths of its network rather than a specific schedule.
It’s been fashionable among media punditry for some time to interpret these kinds of developments in the TV industry as proof that the old business model is breaking down and the networks are in decline. Cord cutting, the proliferation of new content providers, second screen options and shifts in advertising budgets from broadcast to digital are all considered nails in the coffin of the industry old guard. This is not an isolated view. Want proof? Try Googling “TV is dying” and compare the results to “TV is not dying.” A popular interpretation of the Fox announcement was “they get it.” That Fox understood the new TV reality and was willing to turn the network broadcast world order on its head to survive.
But if you listened closely to Reilly’s announcement and the fey chatter that ensued you could almost hear eyes rolling in TV executive offices across the continent. They are well aware the rules of the game have changed and they do not buy into the death of TV prognostications. Instead, they’ve been getting with the new program, and in a surprise to many, are actually holding up quite well.
“Nobody only shoots pilots in the spring,” says Barbara Williams, senior vice-president, content at Shaw Media. “Everyone is developing on a more broad schedule so Fox is maybe pushing that agenda a little bit more… but at the end of the day as long as the cycle of our business is dependant on a May upfront that demands there be a fall schedule that advertisers can buy, it still pushes Fox and everyone else to deliver in that cycle, so I’m not sure it’s as profound a statement as it seemed in the headlines.”
It’s not to say the TV network and broadcast world isn’t feeling the pressure from dramatic changes. A January analyst note from Scotiabank concluded that in the third quarter of last year, for the first time ever, Canadian TV subscriber numbers suffered an annual decline. Jeff Fan, the analyst, forecast Canadian pay TV household penetration will decline from 87% in 2013 to 69% in 2023. Cable penetration rates are a measure of cable company health, but are also an indicator of the appetite for the network fare they are delivering to their customers.
Many would point to those numbers as justification to get ready to sound the TV death knell. But, in fact, broadcasters reached an inflection point some time ago and have been fighting back. For one, the industry has started to respond to the quality gap with specialty and over-the-top channels by producing some of the highest quality programming seen in decades. The industry as a whole has also started to deliver on its promise to make content more readily available on multiple platforms, where there is a lot of digital upside. And social media has delivered an engagement boost just live events as well as regularly scheduled shows by amping the shared-experience watercooler effect.
Of course the ultimate test lies in the audience numbers and advertising dollars. Here again, the numbers show the industry is holding up. Viewers are sticking around. BBM, an industry group, reported last year that the average Canadian 18+ spent 29.4 hours per week watching television. In the most recent Global AdView Pulse from Nielsen, advertising in newspaper, magazine, radio and cinema all declined while TV ads were up 4.3%. (None of them came close to internet spend, which was up 32.4% but digital was clearly stealing more from other media than from TV). Meanwhile, Canadian ad forecasts are relatively rosy. ZenithOptimedia projects Canadian TV ad spend in 2014 will hit $3.47 billion up from $3.39 billion in 2013. Likewise, PwC last year looked down the road four years and saw that total continuing to climb throughout. There is even additional upside if newly developed hybrid viewer measurement efforts can raise the value of multiplatform TV audiences.
Judging by the strength of Williams’ convictions that TV has a lot of life left in it, the naysayers may want to stop planning a funeral. Television isn’t anywhere close to dying, she insists. “I don’t even think it’s ill.” Here are a few reasons why:
Much has been made of how the HBOs and Netflix of the world have set new standards for quality television programming, leaving viewers expecting superior production value and shows “almost looking like mini movies,” says Robert DaSilva, managing director, trading and activation at Mindshare Canada. We see this spilling over to mainstream television with Global’s Blacklist and CTV’s Hostages. Viewers have become more demanding than ever before, which raises the bar in terms of the quality programming broadcasters offer, says Williams. Canadians, she says, are enjoying more multifaceted serialized primetime dramas. In past years, Global was careful not to pick shows that were too complex because “you couldn’t count on people having seen the [episode the] week before,” says Williams. Years ago a show like the supernatural/police drama Sleepy Hollow never would have made it to the small screen because of its complicated storyline, she says. It’s less of an issue now when it’s so easy for viewers to catch up when they miss an episode.
While OTT players may be stealing eyeballs with original and critically acclaimed programming, a large portion of the content originated on TV. A healthy chunk of the inventory carried by services such as Netflix and Amazon Prime first aired on broadcast television. It’s unlikely that either player could exist on movies alone or afford to produce more than two or three original series a year. “There is some confusion over what people refer to as TV,” says Hayden Mindell, vice-president of television programming and content, Rogers Media. “Audiences continue to watch as much television or more than they ever have—just where they have watched it has changed.”
“Like other media, broadcasters are adapting their ad product and agency service models to reflect their transition to multi-platform content providers,” ZenithOptimedia concluded in its last national Advertising Expenditure Forecast report.
“Future ad revenue growth,” it stressed, “will come from their digital offerings.” One of the ways the networks have attempted to capitalize on the proliferation of new screens is by introducing apps that allow Canadians to watch shows live or on demand using their mobile phones or tablet devices and Canada’s networks are trying hard to hold onto their own audiences and lock out each other. CTV and City have made their apps available for free to Bell and Rogers subscribers, respectively. In Global’s case, only subscribers to Shaw, Shaw Direct, Cogeco, Telus and Eastlink can access shows.
The digital space also acts as a playground where Shaw can test ideas and talent before moving content to the primetime television schedule, she says. Nadia G’s Bitchin’ Kitchen, for example, started as a digital series before moving to Shaw’s Food Network Canada specialty channel. Online is an easier place to play, she says, and minimizes the risk if for some reason a show doesn’t resonate with viewers.
Broadcasters have made strides in the digital TV arena, but they still have a long way to go. Fan’s Scotiabank study finds that the usage of “TV Everywhere” options is below expectations, due to limited content choices and the complexity of log-ins. Media buyers are saying the technology behind these experiences isn’t up to snuff. “We do look at all screens, but not all screens are equal and not all are fully optimized from a content, technology or user experience perspective,” says DaSilva. While difficulties with log-ins or technology can be an issue, Lynda Cooke, VP of broadcast trading at PHD Canada says viewers still prefer to watch full programs on TV, or resort to YouTube and similar services to watch video online.
LIVE AND SOCIAL
One TV truism that has gained currency in recent years is the value of event viewing, especially live sports and big events. This is the stuff people particularly want to watch as it happens—not later.
The Super Bowl, the Grammy Awards and the Academy Awards are a reminder of the importance and big business of must-see, live TV. The marriage of social media and live television can help capture a moment in pop culture that simply can’t be replicated with VOD or PVRs. Case in point—the Imagine Dragons and Kendrick Lamar mash-up of “Radioactive” and “m.A.A.d. city” at the Grammys was a sensation, sparking 171,593 tweets per minute.
“For viewers, watching television live allows them to stay current and engaged in the conversation—and in the age of social media nothing carries more social capital,” says Mindell at City. Twitter and Facebook have also helped lure audiences back to appointment TV, giving broadcasters the opportunity to forge deeper connections with viewers through second-screen experiences.
For example, Big Brother Canada, which aired on Slice last spring, launched a 24-hour, seven-days-a-week stream of what was happening in the house at Slice.ca, as well as creating an online game that allowed viewers to earn points to influence what the participants in the house ate or which challenges they would face.
GOING OVER THE TOP
The three private broadcasters have one unique advantage going for them: ownership by major cable companies. “Vertical integration” could provide CTV, City and Shaw the power and resources to respond to the threat of Netflix and other over the top providers, and all three are exploring some kind of OTT subscription service to deliver the network content in the way TV fans increasingly demand. “We expect Canadian pay TV operators will enter the OTT market in a more meaningful way in 2014 to combat the OTT threat,” wrote Scotiabank’s Jeff Fan. “The rationale for these operators is to cannibalize their own base before [Netflix] or other OTT providers beat them to it.”
Rogers Media, which owns Marketing, refused to confirm widespread reports it is in talks with a number of Hollywood studios to acquire the digital rights for the launch of an over-the-top video portal. Multiple unnamed sources close to the deal say the service is designed to mimic Hulu Plus, which is supported by advertising and subscriptions. Global and CTV also aren’t saying much about new offerings of their own, though CTV’s senior VP of programming Mike Cosentino said that when it comes to OTT—as it is seemingly the case with all parts of the TV business today—“every option is on the table.”
“We recognize there are other business models in our market and we’re looking at ways to step into that space.”
As part of our Mid-Season TV Report, Marketing looks at each of Canada’s four major networks, reviewing their lineups for ratings hits and misses, innovative advertising partnerships and how well each is adapting to the multi-screen universe. Check out our preview of Global’s mid-season ranking.