Thursday, September 7, 2006

Internet takes over TV

This was first published in Marketing magazine in September 2006. As internet TV is now really starting to make inroads into audiences, I think it still makes relevant reading for agencies and media folk four years later...

So the biggest story from the Edinburgh TV conference is Charles Allen’s view on Channel 4 and the BBC. The British TV world is never as entertained as when it’s beating itself up, and Allen may regard the temporary diversion of attention from ITV’s woes as a success. But it all seems depressingly parochial and short term. There are seismic changes that will happen to TV over the next 5-10 years, and British media has to start being less inward-looking if it’s going to thrive.

Right now, IPTV is in its infancy. But its current scale belies the significance of its development. For British broadcasters, the impact will be felt in two ways – on audiences and on the competitive landscape. And for advertisers, the key challenge will increasingly be reaching a growing band of consumers who are simply dropping off the radar.

Fragmentation, PVRs and the internet started the trend which IPTV will continue – top-slicing the audience, as younger and upmarket viewers find other things to do. The fact that ITV1’s audience share last quarter was its poorest ever took interest away from the fact that young men and upmarket audiences are an ever-declining part of TV viewing figures.

Since 2002, the proportion of ITV’s audience made up by 16-24 Men has fallen 25%, whilst commercial TV has fallen by just under 9%. So ITV’s audiences are not just falling, they’re becoming inherently less valuable to advertisers.

IPTV will bring limitless choice to consumers, and as choice proliferates, those with the means to exercise it will do so. So this top-slicing trend will accelerate over time – hollowing out the value of broadcast overall, and focusing its premium on event TV.

UK broadcasters have all made moves in the IPTV space themselves, streaming programmes online to PC or mobile, and offering movie downloads. But the open internet model of TV distribution will favour scale, and all the major web publishers know this. MSN, AOL, Google and Yahoo are actively developing in this area, and have deeper pockets.

These new players on the block have a massive domestic market and global reach as well – they dwarf UK domestic media companies, and this will give them substantial leverage in content acquisition. They also command huge audiences on the web, and this will give them a head start in building an IPTV franchise.

The competitive landscape looks very different for broadcasters in an IPTV world. So what are the implications for advertisers?

Firstly, ads themselves look very different in an on-demand world. They’re often much shorter, and frequently backed with interactive elements. But as creative agencies learn a new visual language for advertising online, media agencies face even more substantial challenges. Because TV in an IP world – delivered to a TV via either the internet or a set-top box – is entirely different to broadcast.

It’s delivered individually to each viewer’s screen. And this means that the whole panoply of TV trading traditions and metrics become redundant. Share deals, station price, TVRs, dayparts and channels all go out the window. Instead, ads will be addressed individually to viewers based on their past behaviour, their location, their search behaviour and the number of ads they’ve already been exposed to. And success will be tracked not in media terms, but in outcomes – awareness, purchase intent, sales.

How can I be so sure? Because this is common practice right now on the web. And to a computer, a video file is much the same as a banner ad file.

In an IPTV world, the technical knowledge, relationships with media owners and metrics are fundamentally different to those in TV now.

Lots of people still watch telly. I do. Everyone I know does. It’s not going away, it’s simply becoming less potent. And as broadband develops, this isn’t levelling off – the impact is already felt, and this is accelerating. The skills already exist to exploit this space, and they already represent a significant competitive advantage for those who’ve worked to develop them. So is IPTV a merger of internet and TV, or is it another internet takeover?

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