[csaa-forum] New viewing habits

[Terry Flew]

Liz

Yesterday's Australian Financial Review had a feature on this by Neil 
Shoebridge in the context of how the number of 'eyeballs' directed to the 
Nine, Seven and Ten networks is in decline, due to both the impact of pay 
TV and other domestic media consumption habits, raising the question of 
whether advertising dollars will start shifting away from free-to-air TV. 
I've provided the text below, but the newspaper article had a very useful 
diagram on this which is not reproduced in the online version.

Cheers
Terry

TV's uncertain future
Author: Neil Shoebridge
Date: 18/04/2005
Words: 1916
Source: AFR
                                 Publication: The Financial Review
Section: News
Page: 61
Why do advertisers cough up more and more money to run ads on TV when the 
audience is shrinking? Neil Shoebridge reports that a day of reckoning may 
be coming.
Their audience is declining. Their advertising rates keep rising. Rivals 
are slowly gaining ground. Australia's free-to-air television networks know 
that at some point, the combination of falling audiences and rising costs 
will squeeze their ad revenue base. The question is when.
Executives at the Nine, Seven and Ten networks say the squeeze is many 
years away, and demand for TV advertising time continues to outstrip supply.
Why? Because free-to-air TV, they argue, is the most effective mass medium 
and at a time of fragmenting consumer media consumption habits the only 
medium that can still reach a large number of people.
"Free-to-air TV is still the strongest ad medium known to man, by a long 
shot," says Tony Bell, chief executive of TV and radio group Southern Cross 
Broadcasting.
"Yes, there are challenges to the time people spend watching TV, such as 
the internet, but it is illogical to think that advertisers would abandon TV."
Marketers and media buyers tell a different story. They are not abandoning 
free-to-air TV, but they are increasingly turning to alternative media, 
such as the internet and mobile phones, to reach consumers.
The TV networks know that trends in consumers' media habits and companies' 
advertising habits are working against them, and that their dominance of 
the $10 billion media advertising market will start to slip.
"It is inevitable that if you lose audience and your advertising costs are 
rising, at some point someone will push back," says David Gyngell, chief 
executive of Nine Network, part of Kerry Packer's Publishing & Broadcasting 
Ltd.
"But TV is still the most effective way for companies to move product. It 
is the most dominant advertising medium and will remain so for at least the 
next decade."
A decade is a long time in the media industry, particularly given the rapid 
spread of mobile phones, DVDs and the internet, plus emerging technologies 
such as broadband TV.
According to media agency Fusion Strategy's Steve Allen , the average cost 
of reaching 1000 adults with TV advertising during prime time (6pm to 
10.30pm) has shot from $13.03 to $24.26 over the past decade, an increase 
of 86.2 per cent.
Over the same period, the average number of people watching commercial 
free-to-air TV stations during prime time has dropped more than 9 per cent, 
from 3.05 million to 2.77 million.
Allen points out that other media have also jacked up their ad rates over 
the past decade while delivering the same number of potential customers or 
sometimes fewer to marketers.
True. But TV attracts the most attention and money. According to figures 
released by the Commercial Economic Advisory Service of Australia last 
week, free-to-air TV had a 52.9 per cent share of the national ad market 
(that is, excluding classifieds) in 2004, down from 53.4 per cent in 2003.
Last year, the number of people tuned in to the commercial networks during 
prime time slipped 2.4 per cent, and Allen predicts it will drop a further 
2.3 per cent this year and 2.5 per cent in 2006.
Despite last year's fall, two of the three networks secured ad rate 
increases for 2005: Ten Network upped its rates 8 per cent and Nine lifted 
rates 6 per cent.
Kerry Stokes' Seven Network did not get a rate increase for 2005 because of 
its woeful ratings results in 2004, but the success of programs such as 
Lost and Desperate Housewives this year has enabled it to boost some of its 
ad rates more than 50 per cent.
Why do advertisers keep stumping up more money to run ads in a medium that 
is delivering an ever-smaller audience?
"The answer is simple: reach," Allen says. "Advertisers who want to reach 
big audiences have to use TV.
"Desperate Housewives reaches more than 2 million people in five cities. 
You can build advertising schedules in other media to reach 2 million 
people, but TV is the only one that enables you to do it in one hit."
Zenith Media trading director Henry Tajer says habit and paranoia ensure 
the TV networks still command a big share of advertising dollars.
"Advertisers and the networks have been arguing about falling audiences and 
rising costs for more than a decade," he says. "The paranoia of marketers 
about not having TV on their advertising schedule is what keeps TV where it 
is."
Some media buyers say the level of agitation among advertisers about rising 
TV costs and falling TV audiences is overstated.
Marketers, they say, know that using other forms of media to reach the same 
number of people that TV delivers would be complicated and expensive.
"There's a lot of talk among advertisers, but not a lot of follow-through," 
says Starcom chief operating officer John Sintras. "Advertisers will 
continue to try alternative media, but it is very hard for most of them to 
reduce their TV advertising, because it does work.
"Mass free-to-air TV advertising is far from dead. A lot of advertisers 
still need TV."
Gyngell says Nine's clients regularly want to argue about the cost of TV 
advertising, "but they never say it doesn't work".
But some media buyers and marketers say that eventually, the free-to-air TV 
networks' audience decline will lead to a loss of ad revenue share.
Anthony Fitzgerald, a former sales director at Seven and now chief 
executive of Multi Channel Network, the company that sells ads on pay TV, 
says the day of reckoning could come sooner than the networks think.
Given his job, Fitzgerald is not an impartial commentator. But he argues 
that the free-to-air networks' revenue base will start to be squeezed in 
the next five to 10 years.
"TV is still the most powerful communication vehicle in the world, because 
it can quickly affect consumer behaviour," Fitzgerald says.
"It will remain very important for companies that want to reach a mass 
audience. But it won't become more valuable, because its audience is 
falling. Eventually the free-to-air networks' business will be affected by 
the ongoing shift in consumers' media behaviour."
Pay TV is now found in 24 per cent of Australian homes. In those homes, 
about 54 per cent of all TV viewing time is devoted to pay TV, giving the 
medium a 15 per cent share of all TV viewing time (across homes with and 
without pay TV) in capital cities.
The free-to-air networks say those figures are meaningless as they cover 
24-hour periods, not prime time, which accounts for about 75 per cent of 
the TV ad market.
Fitzgerald disagrees. "The subscription TV numbers are not meaningless," he 
says. "Subscription TV is about providing choice 24 hours a day, seven days 
a week, 52 weeks a year not just in the artificial time zone of 6pm to 
10.30pm."
Total Advertising & Communications chief executive Barry O'Brien says 
free-to-air TV is "still the powerhouse of advertising".
"Any marketer that drops it from their plans is destined for a major slide 
in market share and visibility," he says.
"But some money is leaking out of free-to-air TV, mainly to pay TV," he 
says. "The networks need to continue to investigate where and when they can 
make a dollar with new revenue streams, because their golden days could be 
coming to an end."
The internet now consumes more of people's time and steals ad dollars that 
might have flowed to TV, newspapers and other traditional media.
But according to Roy Morgan Research, at this stage the internet has not 
eroded the time people spend in front of the box.
Morgan's research shows that Australians spent an average of seven hours 
and seven minutes a week using the internet during 2004, up from six hours 
and 20 minutes in 2003. But TV viewing went up, not down, last year, from 
20 hours and 14 minutes a week to 22 hours and 12 minutes.
According to Morgan, TV's share of total media time last year was 43.7 per 
cent, up from 42.2 per cent in 2003. Radio's share rose from 30.8 per cent 
to 31.6 per cent, while newspapers' share dropped from 8.6 per cent to 7 
per cent and magazines fell from 5.1 per cent to 3.8 per cent.
The internet's share of media time climbed from 13.2 per cent to 14 per 
cent. That growth underpinned a 64 per cent jump in the online ad market, 
to $388 million, during 2004.
Online advertising is still small fry compared with the TV and newspaper ad 
markets $3.26 billion and $3.64 billion respectively last year but online 
companies say they are rapidly gaining ground.
"There has been a massive shift in consumers' media consumption," says 
Yahoo! Australia and New Zealand managing director Cliff Rosenberg. 
"Advertisers have to follow and go where people are spending their time."
Rosenberg says the internet's accountability as an advertising medium, plus 
the spread of broadband connections in homes, will keep the online ad 
market growing at least 50 per cent a year for the next few years.
According to the research firm Nielsen NetRatings, 49.8 per cent of home 
internet users had broadband connections in February this year, up from 
24.4 per cent in February 2004. It predicted this would pass 60 per cent 
over the next six months.
"At some point, the internet's share of ad dollars will match its share of 
people's media consumption time," he says. "It's only a matter of time 
before they line up."
Others disagree. Tajer says the online ad market will continue to grow 
rapidly "because it is so high profile and measurable", but its share of ad 
revenue will not match its share of consumers' media time because it is 
such a fragmented medium.
Tony Bell says the internet's media time share and ad revenue share will 
never line up.
"For that to happen, online advertising would have to become a lot more 
appealing and eye-catching," he says.
"The claims that broadband will dramatically boost the online ad market are 
highly questionable. Broadband will make internet content more appealing, 
but people will be paying for content, not ads."
Broadband TV is a clear threat to the free-to-air networks. Telstra is 
experimenting with internet-delivered TV and has been buying the internet 
rights to TV programs from Hollywood producers.
But a Telstra executive admits that its broadband network is too slow and 
will remain too slow for at least the next five years to make watching TV 
online an attractive alternative to free-to-air TV.
"Do people want to watch long-form video online?" asks Sintras. "I'm not 
sure that they do."
Although the TV networks are confident their medium will remain the king of 
advertising, they are hunting for new revenue streams, such as "brand 
integration" in programs (industry jargon for product-placement deals) and 
the sale of their content to new-media suppliers such as mobile-phone 
companies.
PBL, for example, has been working on advertising packages covering Nine, 
its magazine arm Australian Consolidated Press, its half-owned internet 
business ninemsn and the cinema chain Hoyts, which PBL and West Australian 
Newspapers recently bought from Kerry Packer's private company.
Seven is developing several non-prime-time programs in which advertisers' 
brands will figure prominently, including Saturday Kitchen and a music 
program called Eclipse. Its new drama series Campus and Last Man Standing 
will also include product-placement deals.
"All of the networks are talking about getting closer to advertisers, and 
adding value outside of simple spot advertising," Sintras says.




At 11:05 AM 19/04/2005 +1000, you wrote:
>Dear colleagues
>
>Are you, or do you know anyone who is, working on research into new 
>viewing habits.  By this I mean viewing audi-visual product other than by 
>watching a TV screen at home or going to the cinema.  I guess that means 
>internet-based acquisition and viewing of product.  The Sydney Film 
>Festival is organising a forum on the subject and is looking for a speaker 
>who knows what the punters are actually doing.
>
>Liz
>
>
>
>
>--
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Dr. Terry Flew
Senior Lecturer and Discipline Head, Media and Communication
Course Co-ordinator, Creative Industries postgraduate coursework degree program
Reviews Editor, Continuum: Journal of Media and Cultural Studies

Creative Industries Faculty
Queensland University of Technology

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