The world of TV is in flux as viewers and advertisers transition to digital formats. “The TV advertising model must evolve” if it wants to remain a “potent” channel, warns a comprehensive report from Enders Analysis, commissioned by Isba, which we take a look at as part of our deep dive into the future of TV.
Ad formats and buying processes still have a lot of room for improvement to futureproof the medium. First, broadcasters are faced with an immediate audiences contraction. The report forecast that UK broadcasters would only account for 61% of total video viewing across all platforms by 2027, down from 72% today. It would comprise just two-thirds of all commercial video (down from 74%). Time spent watching TV was predicted to fall 25 minutes to just 1 hour 49 minutes of commercial TV per day too.
If accurate, people will spend less time with the broadcasters very soon – which means said broadcasters will need to mine more value per user, or stem the tide and keep those audiences engaged. With audience scarcity, ad prices could rise.
Meanwhile, this income on the bulk gets directed into content. It’s a perpetual-motion engine. Channel 4’s total content spend in 2019 was just under 80% of its advertising revenue, while for ITV the figure was just under 70%. If revenue falls, UK content is threatened.
As part of The Drum’s deep dive into the Future of TV, we share four ways broadcasters can futureproof their ad products and keep hitting those public service requirements.
It wasn’t so long ago we all watched linear TV. Ad breaks were booked weeks in advance. All viewers saw the same ad break. Advertisers would buy the spots based on the size and make-up of audiences. Contextual considerations occured too (you see a lot of food ads around dinner time).
Furthermore, launching a campaign during a prestigious show the whole nation enjoys brought additional uplift and guaranteed family viewing. But then viewers were flooded with choice and digital means of watching TV through connected TV (CTV).
The feedback from digital consumption, layered with the boom in personalized, targeted marketing, changed the nature of TV buying. Broadcasters knew who we were and what we liked, there were fewer assumptions, and a slew of opportunities to deliver more relevant ads – from saying the name of the viewer to simply directing them towards their local shoe store using geotargeting.
BVOD formats help brands reach supplementary audiences that have fallen away from linear as people schedule their own viewing. Some remain in broadcaster ecosystems, others get pulled into subscription video on demand (SVOD) that can carry few ad opportunities.
These two channels are bought very differently. Linear live TV is traded on share of budget (SOB) – an agency’s commitment to spend x amount of its TV budget with a certain network in return for favorable terms. Meanwhile, BVOD pursues volumes of audiences. They need to work more closely together. Buyers trade in apples and oranges.
“There was widespread consensus that contract rights renewal (CRR) binds linear TV into SOB and an unintended consequence of the mechanism has encouraged the flow of monies out of TV.” This comfortable arrangement also hinders innovation, the report argues. “As viewing naturally transitions online, volume deals will account for a greater proportion of total TV revenues, and over time will account for the majority. Having separate deals for linear and BVOD is not the optimal dynamic.”
The landscape is fragmented. Media agencies see the opportunities but not necessarily the best means of seizing them.
Pricing and flexibility
Peak TV needs to be booked weeks in advance. Modern specialists are used to the instant transactions afforded by the likes of Facebook and Google.
TV needs to embrace this flexibility – which did come during the pandemic when demand slumped, advertisers struggled to produce creative and ads had to shift at short notice with regards to local lockdowns.
TV strategies will increasingly have to encompass linear and BVOD, but again we deal with two disparate mediums. Linear is sold against a cost per thousand impacts (CPT), weighted by station average price (SAP), which can fluctuate based on demand and the quality of inventory. BVOD pricing comes at a fixed cost per thousand impressions (CPM).
Advertisers had concerns about both methods of measurement and demanded more transparency about how the prices are calculated.
To simplify matters, Enders’ interviewees called for a two-tier system splitting out premium and standard content.
Premium could be sold contextually in classic linear style and standard could be targeted at users. “The linear/BVOD inventory in the premium content would be determined by the broadcaster/sales house and could include, for example, individual channels, peak, particular genres, live sport or even specific programs. Within this context buy, advertisers would continue to benefit from quality metrics, such as position in break, programme requests and so on.”
The standard inventory that advertisers wouldn’t generally flock to may be the best location for addressable ads tailored to users.
“This requires significant investment in tech and may take a couple of years to be put in place. However, there is real progress in this area, such as the broadcaster’s new data-matching tools that improve targeting options for advertisers on the BVOD side.”
It said that self-serve will be a “vital part of TV advertising’s future”.
With BVOD still in its infancy, there were concerns about how advertisers prove the new medium is effective.
“A common view that BVOD’s value remains unproven.” Some wanted standardized measurements that encompassed Facebook and YouTube. TV purists argued that a Facebook ad glimpsed on a newsfeed was not comparable to a fully-viewed 30-second TV ad.
“Some saw the benefits of YouTube’s inclusion but were concerned about its lack of transparency and differing viewability and attention metrics.”
Cross-media measurement was a prominent demand, as advertisers need to compare and contrast results across all TV properties. It pointed out that the CFlight scheme, which has the support of the three major sales houses, “should enable advertisers to judge the effectiveness of BVOD as part of a TV campaign for the first time”.
Meanwhile, legacy system BARB has some limitations. The report read: “Project Dovetail can measure de-duplicated reach and time spent viewing for programmes across devices and platforms, but not commercial impacts.” Only individual sales houses can report on BVOD campaigns currently.
“Advertisers, being unable to understand the value of BVOD in terms of its additional reach and frequency metrics, or why they may pay different amounts for a spot in a programme on live TV versus BVOD, are understandably concerned.”
The whole ecosystem appears to be murky. There were concerns across the board about transparency. “Some advertisers expressed concern that benefits of share deals may not always filter down to the client. Auditors’ roles were often questioned.” The lack of communication here “negatively impacted the likelihood of any changes to deals”.
Low agency remuneration was blamed as a reason for agencies to “place greater reliance on the supply side” and thus damage any notion of “neutral planning”. Agencies may sometimes make recommendations to clients on media choices that are not based on what might be most effective for the client, but instead fulfil wider agency deals or drive more profit to the agency.
And with decades of consolidation in the buy and sell side of TV advertising (just four main holding agencies and three major sales house), these problems are deeper entrenched.
This means that agencies are not always optimizing their buys in the best interests of the client. This discrepancy may hit linear TV hardest. “Linear TV may not be as profitable for some agencies as some other media, and as a result recommended TV spend may be reduced.”
The report concluded that advertisers demand high-quality programming, available on any device at any time, innovative advertising products covering linear and BVOD with greater targeting opportunities, as well as greater flexibility.
From late April until early May, The Drum is taking a deep dive into what’s in store for the small screen as we launch our Future of TV hub. And don’t forget to sign up for our Future of Media briefing here.