Streaming is Sidelining the TV Networks. Here’s How They Can Fight Back

Having smaller and smaller audiences has generally been a bad thing for broadcast TV. However, winnowing viewership has also exposed a strength.

On the one hand, it’s true to say that Seinfeld’s debut episode in 1989, which drew an 8.0 rating and was the №14 show that summer, would beat or tie the ratings of any top show today. On the other hand, TV executives could reasonably argue “Where else can you get 8 million or so people to watch something these days?”

That argument doesn’t hold up however, if you consider the growth of streaming services like Netflix, Amazon Prime and HBO Now which often can get audiences like that. In particular, Netflix is responsible for 50% of the overall drop in TV viewing in 2015. If Netflix was a TV network, it would likely be larger than ABC, Fox, NBC and CBS.

The networks have fought the incursion of ad-free streaming services by focusing on appointment viewing like sports, reality competition (which is in some ways like a sport), awards shows and other live fare. They also now even offer up their own content on time-shifted platforms and apps to try to compete with “watch when you want” services. But these aren’t subscription services, so they still need to generate revenue by inserting ads. And the subscription services aren’t resting on their success, Hulu for one is planning to offer live programming too. Are the networks toast?

Feeling the Squeeze

Not at all. Broadcast TV is still a very effective way to get a message in front of a large group of consumers. It can be especially effective if the message is time-sensitive, like if you’re trying to get consumers to attend the opening of a film on a Friday night.

Broadcasters also still have a monopoly on TV advertising because most of the streaming services (with the exception of Hulu) don’t run advertising and even Hulu has an ad-free version which costs a few dollars more.

That means that even if their audiences diminish further, the TV networks continue to be the only game in town for advertisers who want to get mindshare from television viewers..

This isn’t 2005 though. Advertising itself has changed greatly over the past decade or so. In particular, advertisers know that viewers aren’t as rapt as they used to be. Many are checking their second screens during the program and commercials.

Sometimes, as in the case of awards shows, reality TV and sports, viewers are chatting in social media, typically Twitter, about what they’re watching on TV. Advertisers can use this as an opportunity to inject themselves into the conversation, but relying on Twitter is like letting the fox in the henhouse. Once a viewer is active on Twitter during a show, you can bet that when the commercials come, they are going straight to their phone and ignoring their TV. We see broadcasters using tricks to make viewers think the show is back from a commercial break.

While such subterfuge is counterproductive, the realization that engagement is more important than audience size sets the stage for another paradigm shift. In order to remain an attractive option for advertisers, broadcasters will need to figure out how to use the second-screen to amplify their content instead of distract from it. This will also change the nature of advertising from being interruptive to being part of the conversation. As targeting abilities improve, viewers will be more apt to engage with brands since the viewers have been cherry picked to receive relevant messages.

Fulfilling that vision will take some work, but I look forward to being part of a change that will help the networks survive in a Netflix world.