How the big TV networks are adapting to ad-skipping viewers

May 20, 2017 GMT

It’s the television industry’s biggest week of the year. Thousands of advertisers are descending on New York City’s most prestigious venues — Radio City Music Hall, Lincoln Center and Carnegie Hall — to get their first glimpse of the major networks’ new fall schedules before agreeing to shell out billions of dollars for TV time.

But the gathering comes at a troubling time for the industry: TV’s advertising model is under siege.

“Television advertising in 2017 is in a state of total upheaval,” said Steven Amato, chief executive of the digital agency Contend in downtown Los Angeles.

Television ratings have been plummeting and advertisers are loath to pay more money for smaller audiences. Viewers 18 to 49 — the crowd most desired by advertisers — are watching less conventional TV every year, according to measurement firm Nielsen.

Viewership sharply down

Five years ago, 36 percent of people in that age group watched prime-time TV. But in the current season, which ends this month, that number has fallen to nearly 28 percent.

Consumers have been seeking ways to avoid ads — signing up for ad-free subscription services such as Netflix and Amazon’s Prime Video or digitally recording television shows so they can zip through the commercials.

Reflecting those shifts, spending is expected to be lower at this year’s TV ad auction, known as the “upfronts” because the networks sell the bulk of their ad time in advance of the new fall season. Broadcast and cable networks will rake in an estimated $18.2 billion in upfront sales, down 2 percent from last year, according to a prediction from the investment bank Jefferies.

But network executives are determined to hold on to their pieces of the pie. They are working more closely with advertisers to weave products into the story lines of TV episodes and producing more shows that viewers will watch live.

More live programs

The Fox network said Friday it would stage a live version of the 1983 holiday/cult film, “A Christmas Story,” in December. NBC plans to produce the rock opera “Jesus Christ Superstar Live!” on Easter. And ABC is reviving “American Idol,” once the most popular program on TV when it ran on Fox, because the competition show was a magnet for younger viewers and major brands, such as Coca-Cola and Ford.

TV executives also are borrowing from the playbooks of Amazon.com, Google and Facebook that use actual online browsing histories to serve targeted ads for products that individual consumers might be more inclined to buy.

Currently, TV networks almost exclusively depend on Nielsen to provide information about the audiences that are watching their shows. The goal is to augment the Nielsen numbers with more detailed data, gleaned from a battery of other sources, to help advertisers better reach the consumers they want to influence.

So this year, television networks are dipping more deeply into mountains of data collected by pay-TV companies that can track which programs their subscribers watch, social media sites like Facebook and even such unconventional sources as credit rating agencies and the U.S. Census Bureau.

“Media companies are placing huge bets on data to prove the value of television to a greater extent than in the past,” said Ashwin Navin, chief executive of Samba TV, a data and analytics firm.

‘Tons of pressure’

The ability of Google, Facebook and Snapchat to target specific users “has created tons of pressure on the media companies to prove that their commercials still work,” said Navin.

Three major media companies — 21st Century Fox, Time Warner Inc.’s Turner networks and Viacom Inc. — this year announced a partnership to create standards for selling advertising tied to these data insights.

NBCUniversal has said it would sell as much as $1 billion in advertising across its cable and broadcast networks during the upfronts by using data metrics other than Nielsen ratings.

“We’ve gone a step further by saying we’re going to guarantee that (advertisers) are reaching the right people,” Mark Marshall, executive vice president of entertainment ad sales for NBCUniversal, said in an interview.

Advertisers have been clamoring for more details about viewers, rather than continuing to rely so heavily on the basic demographic breakdowns — age and gender — that Nielsen routinely provides.

Knowing who is watching which shows will help ad buyers make more sophisticated decisions for their clients. For example, Hollywood film studios — one of the biggest buyers of TV advertising time — would like to appeal to moviegoers. Insurance companies want to know which consumers are ripe for a new policy. And automakers would like to zero in on that suburban mom who drives a 10-year-old Ford and dreams of owning a new minivan.

NBCUniversal is pitching its “audience targeting platform” to help advertisers make more informed choices. The media company has been pushing digital data, in part, because it is owned by television giant Comcast Corp. The Philadelphia cable company has a treasure chest of viewership data collected from the 23 million homes with Comcast cable TV service.

For example, last year NBCUniversal helped a car company that wanted to find drivers of small SUVs. After sifting through granular audience data, NBC determined that those consumers were inclined to watch shows on the company’s Syfy channel.

“These people were found on Syfy, but Syfy was not a network (advertisers) would have looked at prior to that,” Marshall said. “It’s those kind of insights that advertisers really get excited about.”