Bye bye ITV

B y e   B y e   I T V

Is ITV’s business model doomed? (The inevitable growth of online TV ads). A few weeks ago I was asked to comment on strategic video content and its impact on broadcast advertising. I had a minor epiphany. In the background my pre-teen boys playing as ever on their i-pods and phones, dipping in and out of whatever game they favoured that day, and swapping finds on YouTube with each other. In the background, stuck to the wall, blank and unloved was the TV. I suddenly realised that this generation simply didn’t watch TV anymore.
I later mentioned this to a very switched on tech-y friend and he explained they were “Cable Cutters”, the name given to a new breed that was terrifying the US TV networks. A TV is large and can’t be carried around with you”, he explained. “You’re bombarded by the programmes you don’t want to watch and the programmes you do fancy tend to be on whilst you’re busy doing something else.”
No wonder deferred viewing platforms and i-player have become so popular. Some analysts predict that a crossover point will be reached soon – where more viewers are watching on some sort of deferred viewing system rather than live on their televisions. TV is a social medium however. People like to chat about the programmes they’ve seen together which is why the soaps have always been so popular and why the major channels are so desperate to build ‘destination programmes’ into their schedules. The X Factor Final or Downton Abbey are much discussed at work the next day so people tend to watch programmes such as these within 48 hours of its transmission date.
So far so good. If the X Factor continues to attract a huge audience where’s the problem for ITV? Simple. If a good proportion of that audience is watching on a deferred viewing platform those precious ad breaks are being avoided. It is a fact that most people fast-forward through them all straight into part two. The actual number of viewers of adverts therefore becomes smaller and smaller. This declining audience delivery will have been a source of anxiety behind closed doors for some time.
There’s another problem too. For years, major companies advertised on TV despite the fact that they really didn’t know who was watching. Sure, research told them who was likely to be watching, but there is an old story of a corporate head in the US who moaned that “half of my ad budget is wasted. The trouble is I don’t know which half.” A car manufacturer will pay for a 30 second slot during the News at Ten knowing full well that that’s when most people who are in the market for a new car will be watching. But in amongst that audience will be people who don’t drive or simply can’t afford a new car. What a waste. The web, on the other hand, offers a much more targeted way of reaching an audience. Someone wanting a new car will use certain, predictable phrases and this allows search engines to present ads that are completely relevant to that person at that point in time.
Google recently launched a video version of their Adwords product. Now, a 30 second (or 15 second) TV ad can be shown to an audience that defines its own interest by the use of very specific words and phrases. These viewers are far more likely to pay attention to these online TV ads. So this is a far more cost-efficient way of reaching your potential customers and the ads themselves can have an inbuilt link direct to your website.
These dynamics inevitably mean that conventional TV channels will find their revenues slowly drying up (Sky has a different model where revenues are derived from subscriptions). Even the BBC will find it increasingly difficult to defend the licence fee if large chunks of its own audience is not watching live (and therefore is exempt from paying). The nightmare scenario for ITV, C4 et al is when the Cable Cutters mature and suddenly the first generation of people that has not grown up with television become the dominant consumers.