In my last research note I compared the levels of live versus timeshifted viewing for medical drama House, going out on Sky1, and period drama Downton Abbey, going out on ITV1 (now of course rebranded to just ITV). With a later weekday slot, a more niche audience and a pay-tv broadcast (where PVR/DVR penetration is significantly higher), one would certainly have expected House to have a much lower proportion of live viewers than Downton, with its earlier Sunday slot, broader demographic appeal and free-to-air broadcast. Nevertheless, with Downton averaging a live audience level of 75%, the fact that on average only 25% of the consolidated audience of the premier UK showings of the final season of House was live, did come as a surprise.
As a much higher proportion of adverts are skipped in timeshifted viewing streams, the obvious follow-on question is what impact this is likely to have on ad-break viewing levels, and one can certainly get a good idea by analysing the minute-by-minute live versus timeshifted audience of an episode from each of the drama series in question.This is also a rather topical issue with Fox and other major US broadcasters currently embroiled in a legal battle with Dish Network over its ‘Hopper’ DVR service, which, rather than just giving viewers the usual ability to skip adverts by fast-forwarding them, actually has a dedicated ‘AutoHop’ ad-skipping feature.
Starting with House, and focusing on the UK premier showing of the final episode (Thursday, 24/05/2012, 22:00-22:56) on Sky1, which at 37% got the highest proportion of live viewers for the series, we find a stark contrast between the viewing levels of ad-break minutes in the live versus timeshifted viewing streams. It is true that the 3 centre ad-breaks are marked by clear downturns in both the live and timeshifted viewing streams, but whereas the downturns in the live viewing stream are small, with only around 6% of viewers switching channel (or putting the kettle on, etc., where BARB panel members are diligent enough to unregister their presence for the short time they’re away from the television), around 83% of viewers fast-forward over the ad-breaks in the timeshifted viewing stream. Overall, with over two-thirds of viewing being timeshifted (and it must be remembered that this was even higher for the other first-run episodes) this means that at best the average ad-break minute in the premier showings of House got significantly less than half the viewers (only 44%) of the average programme minute.
It is a similar story for Downton Abbey, where the 5 centre ad-breaks of the series 3 finale (Sunday, 04/11/2012, 21:02 – 22:29) on ITV are marked by clear downturns in both the live and time-shifted viewing streams. As one would expect, the downturns in the live viewing stream are small, with only around 4% of viewers switching channel or leaving the room during the ad-breaks, but this rises to around 75% of viewers skipping the ad-breaks in the timeshifted viewing stream. The main difference with House, however, is that a much higher proportion of the Downton audience watched live, with the overall impact being that the average Downton Abbey ad-break minute still managed to get over three-quarters (i.e. 79%) of the average Downton Abbey programme minute audience.
So, does this mean that the traditional TV spot advertising model is under threat with millions of pounds in potential advertising revenue being lost as viewers make increasing use of timeshifting technologies to skip over the adverts? While it is good to err on the side of caution, and many broadcasters have indeed been aiming to diversify their income streams and reduce their reliance of spot advertising, the TV advertising market has remained strong despite the economic slowdown, and it is likely that, despite all the challenges and stiff competition from other media, television will continue to deliver the high levels of exposure that advertisers desire and find difficult to obtain from any other source. There is a reason why so many online-only businesses choose to advertise on television!
For a start, as discussed in one of my previous notes, all the evidence to date suggests that we are not likely to move much beyond the 20% to 25% mark when it comes to the proportion of our total TV viewing that we choose to timeshift over the next 10 years. As we saw with House, this can of course be much higher for specific programmes, though it must be kept in mind that some of our timeshifted viewing will be in addition to, rather than a substitute for, our live viewing, thus partially mitigating any associated loss in advertising revenues. It must also be kept in mind that a decline in the overall volume of commercial impacts does not necessarily imply a reduction in total TV advertising revenues. It can be argued that, like with any other commodity, depending on how reactive prices are to changes in the quantity being supplied, it is possible that a reduction in the total volume of commercial impacts could actually result in a proportionally higher increase in price (cost per thousand), thus potentially resulting in an increase, rather than a decrease, in total TV advertising revenues. Indeed, a relatively recent study commissioned by Ofcom suggests that this might actually be the case (see report), and although this has proved somewhat controversial (see supplementary report), most experts would at least agree that the TV advertising market has proven itself to be resilient during both economically and technologically challenging times.
The true economic impact of ad-skipping is likely to be more subtle. Sky for example, with its primary reliance on subscription revenues can readily afford to schedule a valuable first-run showing of a key asset like House in a slot that is unlikely to optimise its live audience levels. As long as plenty of people watch the show, whether live or timeshifted, Sky benefits from the exposure this gives to its pay-tv platform, and in the event House did very well in terms of its consolidated audience figures, with the vast majority choosing to timeshift their viewing. When it comes to a free-to-air broadcaster/channel, however, with a much heavier reliance on spot advertising revenues, effective scheduling and promotion (including social media) to optimise the live viewing levels of any key first-run assets is likely to become much more important. As the high levels of ad-skipping in our House case study demonstrate, getting it wrong could prove to be a rather costly mistake to make for any broadcaster relying on advertising rather than subscription revenues as their primary source of income.
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