Why TV still counts, even for digital brands (Episode 1/5)


TV is still a huge player in the creation and shaping of brands. That’s because it still has the power to reach out to each and every one of us, entertaining and informing us with content we love. People love watching TV, and the amount of time we spend watching it still dwarfs the time we spend on the Internet (or gaming), according to Nielsen.

Everyone recognizes the fundamental challenge in marketing on digital video: The audience is spread more thinly than a mass television audience, and that segmentation makes advertising buys more complex and less reliable than TV advertising. What’s more, advertisers perceive that much of the time that audiences spend with digital video is not 100% useful. Some of that is because people are viewing clips that are either too short, or not brand-friendly. But it’s also because more and more digital video content is streamed through subscription services such as Netflix or Amazon Prime Video — neither of which supports advertising.

Even our best-loved digital-first brands can’t live without TV. Take mobile applications as an example. We’ve all read by now the news of how mobile games have had a big TV success during the Super Bowl. Could this be the start of more brands advertising their apps directly on TV?

And there’s even bigger news in this story. In fact, in the US mobile game publishers are now outspending their far larger brethren in the console game sector. And that’s even despite the console-game makers’ traditional fondness for TV, especially during the holiday period. According to data from iSpot.tv, four of the top five biggest TV ad spenders in the video game category for the first quarter of the year were mobile game companies, collectively spending over $130 million. iSpot shows how King, Machine Zone, and Supercell are the top spenders, representing 30% of overall TV advertising spend in the video games category in the US.

Yardsticks

People outside the traditional TV industry typically miss one other thing — something huge. They massively underestimate the importance for brands of the mature and established purchase ecosystem that traditional TV offers. TV has known, large and reliable partners designed to safeguard brands. It (still!) has a large-scale audience. It has transparent data because, crucially, it has a standard measurement metric: the Nielsen GRP is the ubiquitous unit for measuring a TV audience. That means it’s also the standard for buying access to a TV audience.

Digital is a completely different story. It still has multiple metrics, and companies providing metrics, and even struggles to provide consistency across devices.

If you were a brand manager, which one would you choose?

In an industry where the game is to reach a mass audience, the scale of your partners also matters: According to Lumascape, the digital video industry includes more than 400 companies, compared to about 100 in traditional TV. And each digital company offers no more than 1% of the spend that an average traditional TV company is getting.

Finally, TV has incredibly tight interconnections between the business models of free, pay and content creation. You can’t sustain mass-market reach without content that people want to watch. And creating it consistently over time, doing it the right way, is never cheap. The traditional TV industry’s “secret” business model is that it exists on a model of pre-funding content fueled by its pay-TV subscriptions. That gives industry players the luxury of managing a content portfolio that can include plenty of duds — so long as it includes one or two hits.

That, in the end, is the key basis for the industry’s financial robustness — a point that this report will return to later. The business model is fundamentally different from the digital one, where advertising needs to be viewed before the publisher gets paid. (Another point we will return to later is how this is driving digital platforms toward subscription models.)

So at least on the surface, it looks like traditional TV companies are structurally and financially able to weather the storms of disruption from digital players. And many TV executives take this as gospel.

The media companies that only pay lip service to disruptive challenges, with small budgets and digital teams who aren’t empowered, or those with an attitude of “we can always invest in all these small VC-backed companies, so there’s nothing to worry about”, need to wake up and smell the coffee.

Coming next

The following chapters will show why the traditional TV industry is in fact on that precipice of disruption, and why it needs to act fast. Stay tuned.

Anil Hansjee.


Originally published at www.firestartr.co.

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