A Brave NewFronts World
Jim Gaither 05/15/2012
Vocabulary lesson of the month:
ev·o·lu·tion n.
1. A gradual process in which something changes into a different and usually more complex or better form.
Not only are we in the midst of the broadcast network upfronts, but we will soon be in the middle of the fourth annual “Digital Content NewFronts.” “NewFronts” refers to the streaming video upfront, where digital vendors partner with directors, producers, and actors to demonstrate their content and creative flexibility to advertisers and agencies alike.
TV has been evolving over the last 30 years. Cable TV first entered the marketplace on a significant scale 30 years ago, offering 94 basic cable and 20 premium cable networks by 1994. We now have even more broadcast networks, with FOX, CW, Univision, and Telemundo stealing share from the original three.
In the mid-1990s, we were introduced to the World Wide Web, and by January 2012, there were over 612 million U.S. websites that streamed over 22 billion monthly videos to over 164 million unique viewers. Yet with all this new online content, hours spent viewing TV in the U.S. have increased to an all-time high of 4.25 hours per day.
Technological changes are compounding the fragmentation of viewing. Americans continue to view live broadcast and cable TV content, but DVRs now allow viewers to watch content when it’s most convenient for them, not for the distributor. Likewise, broadcast and cable content providers have begun to stream their own content to make it easier for consumers to view on their timetable. And to top that off, an estimated 40 percent of the flat-panel TVs sold in 2011 were “connected,” meaning they can stream video content from the Web through Wi-Fi (sources: Leichtman Research Group; Parks Associates).
So, will the NewFronts be able to erode broadcast and cable dollars? The general feeling among agencies and advertisers is, Not yet. Although we are moving toward a more flexible and fragmented content-viewing model, we are still several years away from the NewFronts making a significant impact on taking upfront dollars:
- Total TV (local and national) expenditures in 2011 were $68.1 billion (source: Kantar), while estimated expenditures in streaming video were $2.2 billion (source: eMarketer).
- Advertisers also plan ahead with broadcast and cable to take advantage of big-event TV opportunities, and thus the upfront allows advertisers to glimpse the next year in terms of what each network has in store.
- Probably the biggest hurdle is the amount of streaming video content available online. With 22 billion monthly streams, content is virtually limitless. To compete for a higher share of advertising dollars and higher CPMs (costs per thousand), digital vendors must compete against the model that exists for broadcast and cable networks: supply and demand. Broadcast and cable networks have been able to maintain high share of dollars and increasing CPMs year-over-year because of the finite amount of inventory they have to sell. It’s Economics 101.
The participating NewFronts companies (AOL, Digitas, Google/YouTube, Hulu, Microsoft Advertising, and Yahoo!) are developing new streaming content and plan to demonstrate that content does not have to be limited to programs with dramatic or comedic storylines. This is their big gun.
Because new online content is developed in an on-demand model, advertisers can get a jump on branding entertainment at a lower cost investment, and it becomes an area where video assets can be used to help dive deeper into the brand, brand messaging, brand history, or supporting brand causes. The mantra “Content is king” has never been more true.
We like the definition of evolution. The preponderance of online video content is challenging the industry, fostering new methods of content creation and revenue generation. It’s keeping the media industry on its toes and challenging us to think ahead and to think differently.
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