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The TV Industry's New Rorschach Test

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A YouTube cooking show has just been picked up for network syndication. Ratings for the Summer Olympics surged, driven by an unprecedented amount of streaming content online. Last month, for the first time ever, not one single Best Drama Emmy nominee came from a broadcast network. The first week of the broadcast season was its lowest-rated in history[1], while on cable Here Comes Honey Boo Boo drew nearly three million viewers[2]. Oh, how the TV landscape is changing!

Today's picture of consumers and their new entertainment behaviors is a Rorschach test of sorts. And as someone who likes to look at the glass as half full, we see opportunity in that illustration -- the future is bright; but there are others who see disaster ahead.

And that is the challenge for those of us charged with finding the good news story in the world of television -- WE often find ourselves at a loss. Not at a loss for uncovering the upside in the business model, but at a loss for who is giving permission to the industry naysayers to dominate the headlines.

Most press reports have taken the Debbie Downer approach. It's become fashionable to take a broad, incontrovertible, negative view and write missives about the 'end of television.' And why not? It's low risk. It's easy to make a bold statement about TV's demise. In five or 10 years, when we've evolved to a brand new model for success (which we no doubt will), who's going to look back at the by-lines of yester-year to see who got it wrong?

So, why is there such a gap between the 'end of days' point of view that pervades our media consciousness versus the excitement that I am feeling today? It's because those naysayers are looking at the wrong metrics, and not at the complete picture -- it leads them to incorrect conclusions about TV's future based on limited data. In order to set the record straight, I'll take on some of the most-repeated, dangerous-in-isolation observations, then add some helpful context. In no particular order, those claims are as follows:

1. TV viewing is down

2. Media companies are losing control of viewers' behaviors

3. Commercials are avoidable and unnecessary

My goal here is to pull the view back up to 30,000 feet. First and foremost, there is no evidence that television viewing is down, unless by "television viewing" we're referring to Nielsen ratings for a show called American Idol (which, amazingly, writers frequently use as barometer for how we're doing in TV land).

What we can all agree upon is that measuring television viewing has become more complicated, and Nielsen's ratings alone can't adequately capture it. Unfortunately, there is no entity that reports live TV viewing, delayed viewing (domestically or remotely), VOD viewing, Netflix and Hulu streaming, and iTunes and Amazon downloads.

Nobody knows for sure exactly how much viewing is happening if you add it up. The good news is that all of these viewing options give consumers more opportunities to watch TV in more places, and they're all monetizable.

Yes, more and more of this consumption is non-linear -- that is to say, not watched at the time it's scheduled on the "base channel." Guess what? This is great for everybody! Great for consumers, for sure. And great for us -- we want viewers to be able to gobble up what we're serving in more places rather than less -- it makes us more relevant. And yes, it also creates a challenge for the most-used and somewhat arbitrary television currency, C3 (commercial ratings within three days of the premiere). So, if we are to grow this business, our job isn't to complain about where our audience is consuming our content. Instead, we will need to partner together as advertisers, agencies and media companies to build a better, modern model that's dynamic enough to evolve as consumers evolve.

The third bullet in the naysayer mantra, that advertisers are losing out because commercials are obsolete with the invention of the DVR, is maybe the most interesting. Despite being able to avoid advertiser messages more than ever, research shows that viewers frequently don't. The percentage of both live and delayed viewing to commercials is increasing year over year [3]. And DVR homes are driving more commercial viewing than non-DVR homes. Commercial ratings for those with DVRs are 12 percent higher than for those without [4].

How could this be? To start with, DVR owners love TV and want to watch more of it -- that's why they bought the DVR in the first place. Second, DVR owners don't always watch on delay. In fact, most of the time (66 percent) they're still watching live [5]. Finally, even in when watching playback, viewers still watch the commercials half of the time (49 percent) [6].

Much of the panic about health of television is based on instinct and intuition, and it's helpful to insert some facts into the dialogue. And looking at data has helped us see opportunity where some see barriers. But we're not wearing rose-colored glasses -- we just see the significant challenges in another way. Here are our three:

1. Measurement needs to catch up to consumers. Some consumer impressions across platforms are measured, others are not. The metrics for the measured impressions don't match each other across platforms. For some platforms we have demos. For some we don't. Some are minutes-based, others are transaction-based. The long-term health of the business depends on reliable measurement that's unified and can support a coordinated campaign.

2. The industry structure needs to be transformed. Once there's proper measurement, there can be a proper strategic advertising model. The most impactful advertising campaigns are centrally managed and creatively executed, with comprehensive measurement and learnings each time. This is only possible with a buying and selling structure that's more progressive and more integrated than it is today. With that would come new ad models and likely a currency with more long-term relevance than C3. Industry inertia is a tremendous hazard.

3. Focus on digital piracy needs to increase. Illegitimate consumption is the only consumption that does not get us excited. Of these three challenges, it's the only one that's not entirely within the industry's control. Piracy is dollars (and jobs!) flying out the window -- it's a serious crime with serious consequences. In the long-run this may be the single biggest threat to television networks.

It's complicated and we have a long way to go. This is a moment of nexus, a crossroads that's really only for people who love a challenge and can approach what's in front of us with a clear head, strong team, and a great consumer proposition. And, if through leadership and innovation we address these three real challenges, the best is yet to come for the television business. We have the other bases covered: beyond the structural changes above, the fundamental thing that will dictate who will be winning five years from now is the same as it was five years ago -- it's the ability to make highly engaging, differentiated content. The networks that do it well now stand a good chance of long-term success. As long as there's content, viewers, and engagement, there will be value to drive business. So instead of looking at what doesn't work, why not work with it? Just because we need to write a new playbook doesn't mean any of us should throw in the towel. So game on -- and I, for one, look forward to being in the game.



1. [1] Source: The Nielsen Company. P18-49. MS 8P-11P. NTI calendar first week of season (1991-2012). LS. Includes ABC, CBS, FOX, CW, NBC, ION.
2. [1] Source: The Nielsen company. P2+. L+Same Day viewing. 8/29/12 at 10pm on TLC. 2.992 million.
3. [1] Source: The Nielsen Company. P18-49. FY 2011 vs. 2012td through July. MS 8P-11P. Ad-Supported Cable. Live and Delayed to 3 days retention.
4. [1] Source: The Nielsen Company. P18-49. 2012td through July. MS 8P-11P. Includes all ad-supported cable and English broadcast networks. Commercial viewing within 3 days.
5. [1] Source: The Nielsen Company. P18-49 in DVR HH's. 2012td through July. MS 8P-11P. Includes all ad-supported cable and English broadcast networks. Live/L7.