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ICROSSING POV:

TELEVISIONS CATCH-22
Written by Roger Wood, Vice President, Digital Media, iCrossing

Tough choices for Traditional TV. Easy choices for Advertisers.


2012 promises to be the most tumultuous year ever in TV media buying as digital video gives advertisers more choices and TV networks more competition. More than 40 percent of the total advertising expenditures in the United States are focused on traditional television so the stakes are high. Can the TV industry yet again delay the full impact of digital video? Theres evidence that the full impact has already hit them. Its time for marketers to break free of the peculiar and self-defeating Rules of TV Advertising and make smart investments into digital video ad formats on a genre-by-genre basis.

A FRAMEWORK FOR UNDERSTANDING ABSURDITY


Joseph Heller was a young writer from USC who was trained in advertising and possessed a strong grasp of the absurd, sometimes contradictory, societal rules that lie beneath the polished faade of our most treasured institutions. In many ways, his landmark novel Catch-22 characterizes the dilemma for a traditional marketing executive attempting to succeed in the modern TV industry. Of course, Catch-22 made popular the phrase that refers to a situation in which contradictory constraints force you to choose from no-win scenarios. The novel is about a fictional Air Force squadron fighting Mussolini off the coast of Italy in World War II. The main characters are young pilots named Yossarian and Orr who are entangled absurd Air Force regulations as shown in this passage: "There was only one catch and that was Catch-22, which specified that a concern for one's safety in the face of dangers that were real and immediate was the process of a rational mind. Orr was crazy, and could be grounded. All he had to do was ask; and as soon as he did, he would no longer be crazy and would have to fly more missions..." Yossarian eventually discerns that Catch-22 does not actually exist, but because the military claims it does, and the world believes it does, the result is complete adherence to the rule. The absence of proof of the rules existence actually causes its own enforcement.

MODERN TELEVISION: THE ULTIMATE CATCH-22


You can find the sequel to Catch-22 in the world of modern television. The Rule of TV Advertising says that you must use television to maximize reach, frequency, recall, and impact. If you break this Rule of Advertising, you are insane. But, if you are sane, you spend your advertising dollars in a way that maximizes the return on investment. Doing so would mean shifting the vast majority of your advertising dollars to measurable video display media, which means youve broken the Rule of TV, which means yu are insane. In order to grow profits, TV executives must convince brands to commit to pay for advertising ahead of a TV shows actual showing to consumers, while guaranteeing stars enormous paydays ahead of ad revenue. The only way brands can justify paying ahead of time is to believe The Rule of TV Advertising. As if to take their cue from Catch-22, the brands obey the Rule, and the absence of statistical evidence of the Rule provides for its own enforcement.

ICROSSING POV: TELEVISION'S CATCH-22

MARCH 2012

That cycle of absurdity is being broken. It only feels like TV is holding its ground against YouTube and Hulu because digital video is taking audience share away from TV gradually, one genre at a time instead of a sweeping change that is easier to notice. Statistics tell us there is no doubt that digital is stealing audiences from television. Ive ranked the principal TV genres from top to bottom, with Number 1 on the list being the most immediately affected by digital video and Number 7 the least:
1. News 2. Comedy 3. Sci-Fi/Fantasy 4. Lifestyle/Talk 5. Drama 6. Reality 7. Sports Now lets take a look at why Ive ranked them the way I did.

NEWS The revolution will not be televised


News will be the first category to see the vast majority of its traditional advertising dollars move to digital news outlets in the short term. Fox News Channel and CNN remain strong with Americans over 50 and the advertisers who chase them. But, these older viewers will not be replaced by the generations immediately younger. Younger viewers wont abandon the news because they never watched it in the first place. They watch clips from The Daily Show or theonion.com. Or, they simply got a constant flow of text messages or blog postings. Take a look at the sample (from one day in January 2012) of average viewership for news programs between the lucrative 7:009:00 a.m. time slot:

News Program Viewership, 7:00-9:00 A.M.: One-Day Sample, January 2012


Network
NBC ABC CBS CNN

Total Number of Viewers (Millions)


5.47 4.96 2.42 0.25

Total Number of Viewers (Millions), Ages 25-54


2.43 2.03 1.06 0.20

Source: http://tvbythenumbers.zap2it.com/category/ratings/morning-news

Those are tiny numbers relative to viewership on the web. YouTube eclipses all the major networks combined during the coveted 7:00-10:00 a.m. dayparts, and I estimate that 50 million of the 4 billion YouTube views per day (about 10 percent) happen in the morning slots of all times zones in the United States. At the height of the Arab Spring, YouTube hit 135 million unique viewers per month, and at its current growth rate, YouTube may reach 500 million monthly unique viewers, or a Super Bowl audience each week, by the end of 2012.

COMEDY The really funny stuff will be online


Comedy used to be a gold mine for the networks and syndicators. Inexpensive to produce, and universally appealing, comedy shows attracted droves of advertisers who paid premium prices. But then production costs got out of hand with the historic contract extension of Friends paying $22 million per cast member in 2002, only to be topped by Charlie Sheens deal for $1.2 million per episode for 24 episodes of Two and a Half Men. Those production costs were ad supported with little or no ability to connect media expenditures directly to revenues. In other words, high production costs have become disconnected from ad

ICROSSING. ALL RIGHTS RESERVED.

ICROSSING POV: TELEVISION'S CATCH-22

MARCH 2012

revenue. The industry has become a casino, with networks placing bets on expensive talent and selling advertisers on emotion instead of measurable viewership data. With its relatively low production requirements, the comedy genre will translate easily to the web. Lazy Sunday, JibJab, Fred and now Annoying Orange spawned millions of comedy producers who now deal only in digital formats. A digital version of Lorne Michaels is inevitable, and we will soon see a sustainable multi-year comedy franchise on the web. In the very near term, advertising revenue for TV sitcom will be surpassed by video display advertising revenue for comedy on Hulu, YouTube, et al.

SCI-FI / FANTASY It takes a little imagination


With the cancellation of V on ABC and The Event on NBC, its increasingly clear that TV will struggle to create another Star Trek or The X-Files. The sci-fi genre just feels right in the motion picture format, and advertisers might do better to buy against blogs for social gamers and players of massively multiplayer online games to get their messages across to sci-fi/fantasy fans. Syndicationheavy channels like NBCs SyFy will do very well because serial science fiction hits make good reruns.

LIFESTYLE / TALK Keep talking


The legends are leaving: first, Larry King and then, Oprah. Who knows how long Ellen will stay interested? And now anyone can become a Very Important Bold Faced name without requiring the cachet of appearing on Charlie Rose. The genre had a good run, but the format needs updating badly. Still, it will take quite longer for the majority of ad dollars to shift to digital. Brands still love women in the 34-50 age range, and women still love talk TV. Advice is popular on the traditional web, but nothing beats the guilty pleasure of talk television.

DRAMA No plot twists here


This genre will likely endure in traditional TV for quite a while. The TV format really lends itself to episodic, serial storytelling. When people say "thats really great TV," they usually mean drama or dramedy. Talented TV creatives who usually distribute through HBO, Showtime, and other pay-per-month formats will likely be the first to migrate to digital. (YouTube, are you listening? Call producer and screenwriter Bruno Heller, creator of The Mentalist and one of the masterminds behind Rome.) Dramas with long story arcs like Rome and Damages could do quite well in digital video because the ad products dont hold the content hostage.

REALITY Just like IRL


I grew up in this genre, leading some of the first product placement media buys in the space with Survivor Season 1. I think itll be quite some time before high-quality reality programming comes to the web. Reality television is actually more sophisticated than it might appear. A lot of work goes into cast selection, plot development, and positioning with advertisers. Mark Burnett and his Survivor brand have appealed to advertisers because he has a rare talent: he knows how to tell a compelling story with regular people placed in irregular circumstances. The reality genre will continue as a powerhouse in television media. Advertisers want compelling, loosely scripted real life (and outright personal tragedy like Jon & Kate Plus 8) to keep consumers fixated.

SPORTS Whats the score?


Advertisers will continue to crave sports programming in the television media. Sports and awards shows will continue to provide advertisers with one of the few vehicles for getting get large populations to watch the same entertainment program at the same time. In a new media landscape characterized by fragmented audiences, thats important. After all, the most Super Bowl XLVI had an audience of 112 million people. Rights management is the other major reason why sports entertainment will be the last pillar to fall to digital media. Digital video media will take quite some time to appreciate and learn the complexities of rights, especially in the major sports. Not only the teams and the leagues, but also governments, are major stakeholders in the status quo.

ICROSSING. ALL RIGHTS RESERVED.

ICROSSING POV: TELEVISION'S CATCH-22

MARCH 2012

SUMMARY
Back to Catch-22. Advertising executives can avoid the Catch-22 scenario by thinking of their video-based advertising on a genre level, as shown in the previous examples. Doing so enables them to articulate to their bosses that they are shifting money from, lets say, CBS to CBS Digital in a structured way that anticipates audience migration and reduces wasted ad impressions. If the TV best producers embrace digital video wholeheartedly, advertisers will only pay for view-through, cost per lead, cost per action, and many other proofs of effectiveness. Advertisers will actually spend less on advertising, with greater effectiveness.

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