In the early days of the Internet, the cost and availability of broadband access, led to the so-called digital divide. The digital divide was the gap between those geographic areas that benefitted from high-speed Internet and could afford it, with those mainly lower income areas that did not have access to the fledgling web.

Since that time the U.S. has fallen behind several nations in broadband penetration and connection speed. Strategy Analytics reports that the U.S. in 2008 ranked 20th among all nations in household broadband penetration with 60%. By comparison, South Korea ranks first at 95%, the Asian nation benefits from a highly urbanized population and a government supported broadband strategy. In fact, many of the leading countries in broadband penetration tend to be small and mainly urbanized such as Singapore (88%), the Netherlands (85%) and Denmark (82%). However, residents in larger geographic nations (albeit with a small population) such as Canada (76%) and Australia (72%) also have a higher broadband penetration. The report estimates that the U.S. will drop even lower to 23rd place in 2009.

Moreover, according to Wired magazine, the average broadband connection speed in the U.S. is less than five Mbps, much slower than the average connection speed in Japan which is 63.3 Mbps. Japan’s broadband penetration is also higher than the U.S. at 64%.

One of the campaign promises of President Barack Obama was to provide broadband penetration in underserved regions across the U.S. to strengthen the economy and provide jobs. As part of the economic stimulus package, $6 billion was allocated to improve the availability and infrastructure of broadband.

Even if broadband becomes ubiquitous, it is doubtful that everyone would subscribe. A survey by the Pew Internet & American Life Project released in January 2009, found broadband penetration is about 60% however, a total of 91% of all U.S. homes do have broadband access. The report also found that about one-third of Americans, if given the opportunity, would still not subscribe to a broadband connection due to the cost. Many dial-up subscribers would prefer not to spend more than their current monthly cost for a high-speed connection. A few analysts estimate that for broadband to become widespread, a monthly fee of no more than $10 would be required. Hence, since cost remains a factor the digital divide while smaller still exists.

Meanwhile as more eyeballs migrate to the Internet, several media companies are grappling with a strategy that would better monetize content from the web. In July 2009, The Walt Disney Co. announced plans to introduce movies, television shows and video games on a subscription basis. Disney management indicated that consumers would be willing to pay a subscription fee if they believed they were getting value. The New York Times has reportedly been mulling over the possibility of charging subscribers a discounted $2.50 monthly fee to access their website. Non-subscribers would pay $5.00 per month. Other newspaper publishers are also exploring various revenue opportunities with their websites, including The Hearst Corp. and E. W. Scripps. Both are reportedly looking at their website as a potential revenue source. The Wall Street Journal, owned by News Corp., does charge for some of its content. News Corp. chairman Rupert Murdoch indicated that this online strategy will extend to other corporate properties including Fox the New York Post among other global holdings.

Online videos are also eyeing the web as a revenue source, as people continue to migrate to the Internet to watch programming. According to The Wall Street Journal, TNT’s The Closer, one of cable’s most watched original programs, is testing the idea of providing the same commercial load online as it does on television, a fourfold increase in ad time. The networks contend they cannot give away premium programming with limited commercials and operate a sustainable business. Despite a potential pushback from online viewers, many networks would like to see broadband video, at the very least, resemble television economically.

The largest cable operators Comcast and Time Warner are also exploring a business model to make cable programming accessible online. The plan is to use a password to protect the content for existing paid subscribers of either cable or satellite companies.

Consumers continue to spend more and more of their dollars and time on media and technology. In Veronis Suhler’s most recent annual study on media, it reported that for the first time (and despite the recession) people spent more time with consumer supported media (e.g., subscription, etc.) rather than with free (mostly broadcast) media.

As consumers spend more dollars on subscription based media, the strategy of providing universal broadband access could derail. The cost could be too high unless it was subsidized by the government, an unlikely scenario.

Additionally, as online content providers experiment with a subscription based model, only those with the financial means will be able to afford to access the new premium rates. This separation will introduce a second digital divide or Digital Divide 2.0.

admin Uncategorized Digital, New York

Whether it was the sluggish economy or a change in strategies of marketers, but in 2008 the amount of network TV commercials that were 15-seconds in length reached 39.8%, the highest to date. As one would surmise, the percent of the standard 30-second was 51.3% the lowest to date. In recent years the percentage of 15-second commercials has been inching upward and if the trend continues (and the economy does not rebound soon) could easily surpass 40% in 2009.

While marketers continue to use 15-second ads as part of their strategy, how effective are these commercials in today’s television landscape. The last comprehensive study on the effectiveness of 15- second commercials was conducted by the CAB in 2000, when 15-second commercials accounted for “only” 31.9% of all network commercial lengths. The study reported that 15-second ads were losing their effectiveness, due primarily, to ad clutter. The number of commercial and commercial minutes has increased over the past nine years. In fact, Nielsen just released a report that stated the number of commercial minutes in prime time on broadcast TV by 3.5% and Spanish language TV by 11% from 2007 to 2008. Logically, the more 15-second ads there are; the more commercials (not just commercial minutes) there are on television.

Fifteen second ads have been with us for the past 25 years in response to the (then) spiraling costs of thirty-second costs on network television. A fifteen-second ad message was, at the time, 60-65% the cost of a thirty-second commercial. The industry was awash in points-of-view, the do’s and don’ts of when and how to use fifteen-second ads as well as awareness studies. In the mid 1980’s most awareness studies reported fifteen-second commercials were between 60-80% as effective as the standard thirty-second spot. By contrast, the 2000 CAB study, reported that fifteen-second commercials had 48% the unaided recall of a thirty-second ads. As one would expect, the recall scores for fifteen-second ads were lower when they aired in longer commercial pods.

As we all know the television landscape has changed dramatically in just nine years. There are more tuning sources, ads are appearing on various screens of various lengths and technology designed to give consumers control over their ad exposures has now reached 30% of all homes. It is time for the industry to re-visit the impact of fifteen-second and various other lengths on viewers across all screens and major tuning sources (including cable and Spanish language networks). While the television industry is waiting for the mounds of information that digital set boxes and interactive TV will provide marketers, they, similar to People Meters, measure tuning, not viewing of commercials and they don’t measure the attentiveness or effectiveness of advertising.

Television remains a vibrant medium. Usage remains at near record levels, there are more choices than ever before and, collectively, marketers spend $70 billion annually. With time-shifting and even place-shifting, ads of various lengths are now appearing on various screens. It is time for industry once again to measure the effectiveness on the length of ad message.

admin Uncategorized Advertising, Digital

The advertising dollars that have been allocated to local media have been steadily declining. For example, in 1997 local media counted for 41.2% of all ad volume; the percentage has steadily declined to 38.6% in 2002 and 33.7% in 2007. The influx of new technologies coupled with current economic conditions will probably mean a continued pull back in any incremental ad dollars allocated to local media.

Another factor has been the consolidation that has taken place over the past fifteen years with media companies and prominent advertisers, such as banking and other financial services, shifting their emphasis from local to national media. The concerns of big national retail outlets and their financial impact on local “mom & pop” shops persists. Industry consolidation has been the result of improved communications and technology. This has had an impact on the media allocation decisions of banks, hotels, restaurants, retail outlets and others. The current economic environment has caused some prominent retail advertisers to file for bankruptcy protection while others have closed their doors. The growth of new technology has had an impact on local television, local radio and newspapers.

Ad revenue of local television stations have been impacted not only by the end of the political season last fall, but also by the automotive industry including dealerships. The automotive industry that usually can contribute upwards of one-third of a local station’s ad revenue have had their ad budgets curtailed significantly. Other top local TV spenders have also curtailed their ad spending due to the economic downturn. Industry analysts estimate that local TV revenue could drop by 20% to 30% in 2009.

Another factor on local TV ad dollars has been fueled by technology. The growth of cable networks has had as much of an impact in audience erosion with local stations as with broadcast networks nationally. The major difference is satellite television. National ads appear across the country on both cable and satellite providers. There is however, no alternative for local advertisers with satellite providers. Local advertisers can use local cable, but because of satellite they penetrate on average only 60% of the market. Moreover, marketers are using the growing number of national and niche cable networks that are more targeted and can be less expensive than ad time on local TV, as well as other less costly outlets.

Since many local stations are affiliates of the broadcast networks, they rely on content from them. With cable and broadband video as alternatives, the networks have begun to explore the possibility of bypassing their affiliates and using their cable partners or websites as a potential distribution outlet. This would have a tremendous impact on the programs on local television. Another factor is Nielsen’s plan to eliminate diaries (and possibly sweeps) across all 210 TV markets, replacing many markets with meters. Traditionally, diary keepers are more likely to report watching broadcast stations than cable. With continual audience measurement instead of the quarterly sweeps, stations are now pressured to provide top notch programming throughout the year to maintain ad revenue.

Ten years ago, local radio was finishing a wave of unprecedented consolidation and was flush with ad dollars, mainly from Internet companies. The ad dollars dropped precipitously after the dot com bubble collapsed in 2001. The wave of consolidation was also criticized for creating “cookie-cutter” radio formats, increased ad rates and the homogenization was criticized by many who complained radio had lost its localization.

Local radio faces challenges from new technologies such as satellite radio, online radio, podcasts, music-oriented websites and perhaps the biggest threat, MP3 players. (Unlike television, HD radio has not caught on with consumers). While satellite radio has been having financial difficulties, Sirius and XM have merged with 20 million subscribers. Online radio continues to grow with content provided that is either rebroadcast from the broadcast stations or programming available exclusively online. According to Arbitron and Edison Media Research, 33 million Americans listen to a webcast each week. In 2008 The Pew Internet & American Life Project found that 19% of all web users have downloaded a podcast. Another factor is the popularity of MP3 Players and other handheld devices that offer music and other content to consumers. Over one-third of Americans have an MP3 Player including over 60% of young adults. Satellite, Internet, podcasts and MP3 Players all know no local geographic boundaries or rely on antennas. Now more than ever, younger people are hearing songs for the first time on a device other than the radio.

According to The Radio Advertising Bureau, ad revenue for local radio dropped by 10% in 2008 compared to the previous year. Revenue for online radio grew by 7% during 2008. Industry forecasters predict radio will have a difficult time in 2009 although online could continue to be a bright spot. Similar to local television, automotive has been a heavy supporter of the medium. Another heavy supporter has been local businesses. Many have been hit hard by the current economic conditions and have curtailed their marketing budgets.

Similar to local television, local radio is undergoing a transformation on how audience data is collected. Arbitron has been replacing diaries with meters across many major markets. The change in methodology has had an impact on the currency. Arbitron claims that 100 diary rating points is equal to 70 meter rating points.

Another local medium that has been going thorough a difficult transitional period is newspapers. The medium has been beset by declining circulation and ad revenue. The circulation of many daily newspapers has been dropping about 3%-5% each year. The drop in circulation impacts ad revenue which accounts for 80% of their bottom line. Ad revenue among major newspapers has reportedly dropped by 15% over the past year. Even more pronounced was the decline in classified ad dollars, which has dropped by 30%. The Associated Press reports that in a recent 2½ month period, four newspaper publishers and 33 daily newspapers have declared bankruptcy protection.

In response, many publishers have shrunk the size of their newspapers, reduced the number of newsroom employees, put newspapers up for sale, published free newspapers to get young people into the habit of reading one, allowed for ads on the front page, as well as other strategies designed to grow revenues.

Many people who have dropped their newspaper subscription are now getting their news online. Every major newspaper now has a compatible website. Unlike newspapers, their websites do not have to concern themselves with printing and distribution costs. In December 2008, Pew Research announced that the Internet had surpassed newspapers as a source for national and international news.

The continued presence of newspapers online continues to be felt. Average monthly unique audience figures for newspaper websites grew by nearly 7.3 million in 2008 to 67.3 million visitors, an increase of 12.1% over 2007. Newspapers however, face competition online from other news related media, as well as blogs from consumer journalists. Some have criticized the policy of the newspaper industry of giving free content online while charging people for the printed edition.

Things are not all doom and gloom for local media. Tens of billions of dollars are still spent on the yellow pages, direct mail newspapers as well as local TV and radio stations. There are still numerous companies that have a finite geographic area of distribution and rely exclusively on local media. Millions of people still appreciate local media’s coverage of weather, traffic and community events. Local media is still used to test market a new product or experiment with a new creative execution. Marketers still rely on local media when the national media schedule under performs in important markets. Advertisers can also test the impact of different spending levels on sales. Marketers still use local media to target a specific ethnic group. Presumably, once the economy strengthens, ad dollars will return to local television, radio and newspapers.

Similar to other industries local media is undergoing a transformation. Although marketers are allocating more of their ad dollars nationally, new opportunities have been evolving locally that are more geographically narrower than the footprint of any TV market, metro, cable system or even zip code. With the continuing emergence of digital media, many marketers also covet the amount of behavioral data to be uncovered while more effectively targeting geographically.

For example, many cable operators and satellite companies have the ability to collect second-by-second viewing data from digital set top boxes. By collecting this viewing data, marketers will be able to uncover such information as whether their ads are being watched in their entirety and can eventually be used to hyper-target with ads that resonate most with viewers down to the household or even individual television set level.

Both broadband video and web radio while providing marketers with a national (or even global) footprint are also becoming available. These local ads can be inserted on a geo-demographic basis by using consumer information (e.g., zip codes) or IP technology. Online radio and broadband video consumption will continue to grow as more content becomes available and consumers become further acclimated to it.

A medium that is having a revival is outdoor media, fueled by digital out-of-home media, placed based advertising and guerilla marketing. Local video ads can appear in movie theaters, taxi cabs, gas stations and retail outlets to name a few. In-store product placement will become more targeted with tailored ad messages for each aisle.

Another local medium that has huge potential for marketers is the cell phone. With the handheld device becoming ubiquitous, marketers by using wi-fi networks, GPS and cell phone towers, will be able to target consumers based upon proximity to points of sale; their activities and other patterns can be measured by these smart phones. After all, local media is about the whereabouts of consumers.

There are concerns about privacy and personal information being used for marketing purposes, a huge factor. Nonetheless, the next generation of media is expected undercover more granular and personal information based of the behavioral patterns of consumers. This will result in more relevant ad messages on an individual basis. You can’t get more local than that.

admin Uncategorized Advertising, Digital, Local TV, Research

In February, the broadcast networks air three of their highest-rated specials, the Super Bowl, the Grammy Awards and the Academy Awards, in what would typically be the “sweeps.” The only problem is that this year, February sweeps have been delayed to accommodate the transition to digital TV on Feb. 17, which apparently will now most likely be delayed until June 12 (the February sweeps in 2009 will begin on March 5). The other major problem? Two of these shows, the Grammy Awards and the Academy Awards, have been in a ratings tailspin.

Last year’s Academy Awards were reportedly the lowest-rated in 39 years, attracting only 32 million viewers (live plus same day), and marking a decline in viewing for the fifth straight year.

Photo Credit: AP

And it’s not just those two high-profile award shows that have suffered audience erosion annually. Virtually every other annual award show is undergoing the same fate.

Last year’s Academy Awards were reportedly the lowest-rated in 39 years, attracting only 32 million viewers (live plus same day). This marked the fifth straight year the Academy Awards reported a decline in viewing. ABC has dropped the cost of a thirty-second commercial to $1.4 million for 2009 (from $1.7 million). The Oscars will also accept movie ads, with certain restrictions, for the first time.

The Grammy Awards have not fared much better, averaging only 17.2 million viewers, among the lowest in years. The audience for the Grammy Awards has also been in a steady downward spiral. In 2008, the Grammy Awards telecast was 3 hours and 40 minutes, the longest since 1992.

Not just Grammys and Oscars
The decline in award shows is not limited to the Oscars and Grammys. Many other award shows on broadcast TV have suffered their lowest or near-lowest ratings in 2008 or 2009.

For example, the 2008 Primetime Emmy Awards drew only 12.3 million viewers, a drop of 33% since 2005. The audience levels were comparable to the 1990 Emmy Awards, the least-watched in history. The 2008 Daytime Emmy Awards followed suit, attracting only 5.4 million viewers and a measly 1.2 rating for adults 18-49. (While honoring daytime TV, the award show airs in prime-time, most recently in June.) The Tony Awards, one of the lowest-rated award shows on TV, continues to suffer from poor audience levels. The 2008 show generated only 6.3 million viewers, a slight increase from 2007 but a drop of 18% from 2006. The Tony Awards averaged a paltry 1.1. rating among adults 18-49.

While the writers strike wreaked havoc with the 2008 People’s Choice Awards and Golden Globe Awards, the audience for both award shows in 2009 did not bounce back from 2007. The ratings for the 2009 Golden Globes were the lowest since it moved to broadcast TV from cable in 1996. Total viewers were down 24% when compared with 2007. The 2009 People’s Choice Awards averaged 9.4 million viewers. The audience for the award show has been in steady decline before reaching its nadir in 2009.

Recent drop
The audience delivery of other award shows such as the American Music Awards, ACM Awards and CMA Awards have actually held in recent years. Nonetheless, the ratings have not held compared with just a few years ago.

What has happened to award shows? Besides the obvious answers such as the continued fractionalization of TV, the shows are too long, there is a glut of award shows on broadcast and cable, many of the nominees televised are too obscure, and too much time is spent on the less-prestigious categories. There are also some other factors to consider.

The award shows are becoming passe with the changing tastes of viewers, especially younger viewers. Award shows, similar to beauty pageants, have been on TV since the early days. While there are still beauty pageants on network TV (e.g., Miss Universe, Miss USA), they are also reporting the same steady audience erosion that many awards shows have recorded. The once top-rated Miss America pageant has even moved to cable after an abysmal showing in 2004.

Audiences getting older
The current median age of award shows proves younger viewers are less interested in these types of shows. Many now have a median audience age of above 50, and are getting older each year. The most recent airing of the Primetime Emmys had a median viewer age of 52.1, the Daytime Emmys was 58.4, the People’s Choice Awards 50.8, the Tony Awards 61.3 and the ACM Awards was 54.7. Other award shows are at the very high end of the key 18-49 demographic, including the Academy Awards at 49.5 and the CMA Awards at 49.9. Only the 2008 Grammy Awards at 45.2 (up from 38.2 in 2004, however) and the American Music Awards at 40.2 fall comfortably within the desired demographic for marketers.

Award shows now face competition from the surplus of reality programs on TV. Award shows too are, at the root, unscripted or partially unscripted competition shows, not too dissimilar from “Dancing with the Stars,” “American Idol” or “The Apprentice” (to name only a few). This was brought to light humorously during the 2008 Primetime Emmy Awards, when Jimmy Kimmel announced that “the winner for the most outstanding host of a reality show or reality competition show is … going to be revealed when we come back after this break.” For the record, Jeff Probst beat out Heidi Klum, Howie Mandel, Ryan Seacrest and Tom Bergeron to win the Emmy in the new category.

Today performers have become overexposed by celebrity magazines, entertainment-news shows and cable networks, as well as the internet. The everyday movements (some can be embarrassing) of high-profile personalities are followed like never before. Hence, an appearance on TV award shows is no longer the novelty it once was.

Highlights are on web, anyway
If the only interest viewers have in award shows consists of “Who won?” “What was said?” and “What did they wear?” then the web can provide them with all those recaps or reviews almost immediately, instead of watching several hours of the program on TV.

The changing model for music may also have an impact on the Grammy Awards and other music award shows. Today people can easily listen to any song and watch any music video on demand via the internet or MP3 player. This negates the purpose of appointment viewing required with award shows and the aura of watching a “live” performance.

That said, award shows will probably not disappear from the TV prime-time landscape the way Westerns and variety show have. (Although several award shows such as the Billboard Music Awards, the Blockbuster Awards or the American Comedy Awards no longer air on TV.) Award shows are live and less likely to be time-shifted, despite declining ratings. They still deliver higher ratings than most regularly scheduled shows. They can still win their time period and could even be the top-rated show of the week. But there’s no denying that award shows are not the blockbuster events on TV that they use to be. The Oscars have been called “The Super Bowl for Women.” These days “The Super Bowl for Women” is the Super Bowl.

badgate Television Award Shows, Digital, Television Ratings

Historically, a television program’s success was dependent on one criterion, the number of viewers (especially young viewers) as measured by Nielsen. While Nielsen ratings remain a very important factor in the success or failure of any program, there are other criteria that the networks have begun to consider. These factors can be the number of video streams watched on websites or mobile phones, the number of people who view the program on demand (either with a DVR or on VOD), the number of downloads on video iPods as well as other handheld devices and the number of DVD sales among others. Since all these ancillary platforms have the potential to boost a program’s revenue (and value), they are now a factor in the long term success of any program. Hence, a program’s profits as measured across all platforms can increase a broadcast network’s revenue base and their parent companies’ quarterly earnings report, just as easily as the Nielsen ratings.

This season, the networks have been slower than usual in cancelling programs, although some shows have gotten the axe. There are perhaps a dozen or more other shows, some first year and some returning, that are on the brink of cancellation due to poor ratings yet the networks have held back. One reason is that with an uncertain economy in 2009, advertisers will be able exercise their option to pull out of their upfront advertising commitment on any show that is cancelled. Another possible reason is that the 100-day writers strike wreaked havoc with the program development season and the networks have a thin bench of replacement shows.

While both reasons have merit, I think there are several other financial factors to consider on why the networks are exhibiting unusual patience this fall. One is product placement in programs; not only does this circumvent those viewers who fast forward commercials with their DVR’s when time shifting, but also has become a new revenue stream for the studios and networks. The early cancellation of these shows could wipe out the product placement dollars for the telecasts that will never air. Another is the financial loss the networks will take by cancelling a program with telecasts already “in the can”. Although this has not stopped the networks in previous seasons, the business model for television has been changing of late. In order to cut production costs for shows (which continues to increase with the advent of digital television), some networks for the first time in recent memory, have begun, in 2008, to “green light” a proposed series based upon a script instead of ordering an expensive pilot when developing their programming strategy. The current economic slowdown may also put limitations on the program development schedule and the number of pilots ordered for the 2009-10 season.

NBC’s announcement of airing Jay Leno weeknights at 10PM, in the fall 2009, is another example of the new economic model of television. The show lends itself to product placement, is less likely to be time shifted, some of the shows clips can run on hulu.com and nbc.com and its production costs are less expensive than dramas and even reality shows. For Jay Leno to succeed, it does not have to win the period, or even charge the most for a thirty-second commercial. What the program has to do is earn a measurable profit for the network and its parent company.

The changing television model could best be explained by one of its biggest stars NBC’s Tina Fey. On winning an Emmy Award for 30 Rock this past September, she said “30 Rock is available to be viewed on NBC.com, Hulu.com, iTunes, Verizon phones and United Airlines, and occasionally on actual television.” While television remains the dominant medium with viewers and ad dollars, increasingly decisions on whether to cancel a program or renew are going to be based upon other factors than just television ratings.

badgate Uncategorized Advertising, Digital