According to the head of Turner Networks, the industry isn’t moving fast enough to compete for the audience’s attention. He worries viewers will be gone to ad-free services if the industry doesn’t quickly embrace ad addressability. Is he right?
At CES 2018, John Martin, Chairman and CEO of Turner Networks, and Randy Freer, the new CEO of Hulu, spoke on a keynote panel entitled “Reimagining Television: A Conversation with Hulu and Turner.” One problem both focused on was how the television advertising industry was not changing nearly as fast as it needed to.
Television moving too slowly to improve the experience
Mr. Martin sounded the alarm regarding the experience of television. He recognizes that ad-free viewing on Netflix and Hulu is a better experience than traditional television. Ericsson data confirms that this is the case. 83% of US on-demand video users say they are satisfied with the user experience of their service, while 68% of TV viewers say the same about linear television.
However, Mr. Martin believes that, in addition to lighter loads, advertising addressability is key to evening the playing field. Unfortunately, the industry is struggling to move to the approach. He says Turner has had addressable products for five years, yet only 5% of Turner ad inventory is addressable today.
Mr. Martin thinks the industry is not moving fast enough:
“Time is not the friend of anybody. We’re competing against platforms that are non-ad-supported, and we know it’s not just about premium content. It’s about what is the consumer experience. We have to drive the value of the advertising that is done in the midst of all of our content video. And the industry, in my opinion, is too slow, too fragmented, and we need to move with a greater sense of urgency.”
For Turner, fragmentation is a real problem. Mr. Martin says that half of scripted TV show viewing is now taking place in on-demand environments, and much of that viewing comes via Turner’s TV Everywhere apps. That means Turner can offer brands addressable ad campaigns across TV and digital. Unfortunately, marketers aren’t equipped to take advantage of these cross-screen campaigns.
Brands part of the problem
New data from VideoAmp says that 60% of marketers believe that campaigns planned and executed through a cross-screen ad platform (CSP) outperform traditional ad campaigns. However, just 16% of them have deployed their TV and digital video budgets in an integrated way.
There is other evidence that brand marketers are part of the reason the industry isn’t moving fast enough. Mr. Freer thinks that brand marketers are saying one thing, and doing another:
“Brands have to stop saying what they want and then doing the exact opposite. “I want addressability; I want targetability; I want value; I want effectiveness; I want efficiency. Oh, and by-the-way, can you lower my CPM 10% because that’s really what the agency is going to get bonused on.” That stuff has to stop if you really want to move this industry forward.”
Is it already too late?
With things moving so slowly in television, Mr. Martin is worried that there won’t be any audience left by the time the industry fixes the experience problem:
“My fear, and what makes me wake up with the sweats, is like when the industry finally figures out how to get full addressability, everybody’s going to be watching video on Hulu and Netflix.”
He could be right. In the past, Hulu executives have said that few people are taking advantage of the $4-a-month option to watch ad-free. At CES last week, Mr. Freer modified that position. He said the majority of millennial subs the company has acquired over the last year watch with ads. This statement could indicate a large minority (49%?) of people are now buying out of the ads.
Whether Hulu has more ad-free viewers or not, one thing is certain: the 5 million US subscribers Netflix has acquired over the last year are all watching ad-free. Moreover, much of their viewing on the service replaces time they previously would have spent with ad-supported television.
Mr. Martin is right to be fearful. In a few years, the vast majority of scripted show viewing could be lost to advertisers completely.
Why it matters
The TV industry needs to make the ad-supported video experience much more compelling if it is to compete with ad-free services like Netflix.
The industry must embrace new approaches like addressability and cross-screen ad platforms if it is to boost the experience.
Unfortunately, the current pace of change may not be fast enough to stem the audience’s flight to ad-free viewing.
 Addressability allows homes to see different ads while watching the same TV channel at the same time. It allows ads to be targeted to households and individuals which should improve relevance and engagement.