TV networks 'on the defensive' as online video outlets take market share
TV networks 'on the defensive' as online video outlets
take market share
By Stephen Battaglio
The usual array of big-name stars and new shows will be
trotted out next week when broadcast and cable networks roll out their fall
programming plans at the annual "upfront" presentations for
advertisers..
But there will also be a lot of tough talk about TV's
rising competitor, online video.
Ad buying agency Magna Global projects that the broadcast
and cable networks will take in $20 billion in upfront sales, a 7% decline from
last year. Younger viewers going online for their video entertainment would
have a lot to do with such a drop.
Digital video ad revenue hit $6 billion in 2014 and is
projected to rise to $7.7 billion this year, according to the research firm
EMarketer.
The exodus of young viewers from TV to online is showing
up in the data from audience measurement service Nielsen. Viewers ages 18 to 34
— a highly desirable group for advertisers to reach as they are still forming
buying habits — make up 25.5% of the TV viewing audience, down from 30.5% four
years ago, according to a study by ad buying firm Horizon Media.
Many of those viewers are spending more time on sites
such as YouTube, which now claims it reaches more viewers in the 18-to-49 age
group on mobile devices alone than any single cable network.
With almost evangelical fervor, "The Fault in Our
Stars" author John Green told an audience of media buyers at the Theater
at Madison Square Garden last month that they risk "losing relevance with
an entire generation" if they are not buying ads on YouTube.
The pressure from online video being the new cool kid in
town has media buyers privately asking TV networks to make a stronger case for
their vitality in the digital age.
"We didn't have to sell the value of television for
a long time," said one top sales executive for a large cable network group
who was not authorized to speak publicly.
"Now you're seeing the industry on the defensive
because clients are enamored with toys under the Christmas tree," the
executive said, referring to online video. "What we've heard is 'You have
got to help me recommend why I should be putting more money into traditional
TV.'"
The networks will attempt to fight the online tide by
stressing the efficiency and reach of TV, where an advertiser's message can
still hit millions of viewers in a short time even as overall ratings decline.
Chances are good the audience at the NBC presentation at Radio City Music Hall
on Monday will see a slide that shows how one episode of its hit "The
Voice" reaches as many viewers in the 18-to-49 demographic as YouTube does
in a month.
There will also be an onslaught of data showing TV
audiences' buying habits. CBS is not just No. 1 in viewers, a recent release
pointed out, it also leads among "consumers who go to movies, shop at
electronic stores, are in the market for a luxury car or SUV, dine out, visit
home improvement centers and purchase products across nearly every major
product category."
When negotiations get started, networks will drill down
even deeper on who is watching.
"There is a lot of need and desire to better define
audiences and who they are and how they are able to be reached," said
Brent Lightfoot, vice president of Naperville, Ill-based Allant Group, which
provides software and data products used to target consumers. "The
networks and the content distributors are leading the charge. They've been
pushed by online. There's a challenge."
As the leader in total prime-time viewers, CBS is the
only media company publicly bullish about its prospects in this year's upfront
marketplace.
CBS Chairman and Chief Executive Leslie Moonves said on
the company's earnings call Thursday that strong advertiser demand in the
"scatter" market — the ads that are bought closer to airtime — are an
encouraging sign for the upfront, which is the time sold in advance with
ratings guarantees. Networks typically move as much as 80% of their prime-time
commercial inventory during the upfront selling season.
As for the competition from online video, Moonves said,
"We do not see it affecting the broader-based television advertising
platform, we see it affecting the niche cable networks much more."
The TV networks are not likely to get too dismissive of
online video when they peddle their new shows next week. ABC parent Walt Disney
paid nearly $1 billion for Maker Studios, which distributes most of its
original programming over YouTube. NBC recently announced an agreement to
stream its broadcast and cable content on AOL and will be looking to sell
online viewing in its upfront deals.
Streaming video services such as Netflix, Amazon and
Hulu, which are pulling away live or "linear" TV viewers, are also
now major buyers of shows produced by the networks' production studios.
It's a key reason why the networks are likely to fill up
the schedules with more shows that they own. Prime-time ratings for network
shows may never be as big as they once were, but ownership means financial
upside from sales to streaming services and foreign broadcasters, where
opportunities are also growing as more markets open up.
"The question 'Do we own it?' comes up a lot quicker
than it used to when we're setting the schedule," one veteran broadcast
executive noted.
The trend is already evident in the new show pickups
reportedly made by ABC. All six of its new dramas ordered as of Friday will be
owned by the network's studio. The only two freshman scripted ABC shows that
didn't get renewed for a second season — sitcom "Cristela" and the
procedural police drama "Forever" — came from outside suppliers.
Copyright © 2015, Los Angeles Times
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