Let’s face it: We all know the traditional TV ad model is challenged. The industry is working to counter this, with talk of reducing ad loads and stopping viewer erosion while proving that traditional advertising still works. The problem is that viewers who want to avoid ads are finding new ways to do so much more quickly than networks are solving the problem. Add to that the growth of ad-free programming services, and the signs are staring us in the face—or, in the case of TV networks, hitting the pocketbook.
Already, 61 percent of viewers globally say they skip ads when possible, according to a Kantar Millward Brown study. At the same time, 64 percent of U.S. households subscribe to at least one video-on-demand service, such as Netflix, Hulu or Amazon Prime, up 10 percent in just one year, according to Nielsen, which predicts that 9 trillion ad impressions—nearly half of all ad impressions on ad-supported cable TV—are expected to disappear in the next five years.
To address this problem, some networks are planning to cut their ad loads. Fox Networks recently said it will trim commercial blocks to two minutes per hour by 2020, while NBC Universal is reducing its prime-time ads by 20 percent and overall ad time by 10 percent. But this isn’t a long-term fix for a financial model based on selling so many minutes of 15-, 30- and 60-second spots per hour of programming.
Another factor at play is content. SVOD services Netflix and Amazon, along with pay cable’s HBO, dominated the recent 2018 Emmy Awards with high-priced content. Shows such as Netflix’s “The Crown,” at a reported $13 million per episode, and HBO’s “Game of Thrones,” at $15 million per episode for its final season, offer viewers high-quality content but are expensive to maintain. Yet Netflix caused a stir earlier this year when it tested video promos between series episodes, prompting outraged viewers to threaten to cancel if ads were introduced.
TV services obviously need to find a way to make advertising work, and that will involve new, creative ways of thinking about the advertising model. A new survey by Mirriad finds that 72 percent of industry respondents are concerned about ad skipping; that breaks down to 79 percent of agencies and 76 percent of marketers vs. 62 percent of content distributors and networks. As for the solution, 81 percent said it’s important to very important that networks improve viewers’ experiences with ads rather than simply cutting ad loads. Download the white paper for key insights from Mirriad’s exclusive survey.