Future of TV_Mindshare

FUTURE OF... television

Future of...Mindshare’s Future of… programme rigorously What follows is an analysis of the Future ofinterrogates the received wisdom and common Television, which we’ve prepared for advertisers andassumptions that exist about the evolving media owners, which we gleaned from a mixture ofcommunications landscape. qual and quant research plus exclusive interviews with industry experts.Using a wide range of techniques – from co-creationcommunities through to extensive quantitative An important read for key insights into this moststudies – Future of… rejects the conjecture that popular of media.we believe underpins the advice offered by somany agencies. Instead, it seeks out surprising,challenging and verifiable answers to questionscommunications professionals face every day. 3

A medium in terminal decline? TV has come under increasing pressure in recent obsolete. Empowered by this technology, we would years and there have been plenty of observers all watch whatever we wanted, whenever we wanted ready to write it off as a mass medium. Much of the it. We would fast-forward through all the ads. And the challenge has come from technology, of course. once-sacred TV set itself would take second place in Newer pursuits like gaming and the web have the home to the all-conquering PC. competed with TV for our attention. It was predicted that innovations like Sky + could make live viewing4

Evolution, not revolutionOnly it hasn’t really happened what they considered to be the to gain ground, there are manythat way. Or not to the extent that key factors determining the TV aspects that will change onlythe industry feared. The reality landscape between now and slowly and less radically thanhas turned out to be much less 2020. And we also analysed lots anticipated. The overall picture isdramatic and much more subtle. of industry data about current most definitely one of evolution,So we thought it was time to take consumption habits, how they not revolution.an unbiased look at the trends are changing and how they mightlikely to affect the development of continue to change in the future.the industry between now and the These subjective and objectiveend of this decade. sources both pointed to the same conclusion: while many of theWe interviewed a number of existing trends - fuelled in thekey industry figures and asked main by technology - will continue 5

key findings6

01 Linear viewing will remain 03 Spot advertising survives asresilient as viewing choices new revenue streams emerge.proliferate. We expect consumers The more commercially valuableto retain their preference for live, audiences will watch more on-demandscheduled TV viewing. programming than the average. This will force broadcasters to adapt in two ways, developing branded content solutions primarily for younger audiences, and addressable advertising02 The brand becomes even more for higher value audiences.important in TV. Strong channelbrands will thrive as viewers look forguidance through all the choice; andthe programme brand will becomecritical as social media help driveviewing to live, blockbuster content. 7

detail8

01 Linear viewing will remain resilient as viewing choices proliferate.Crucially, we’re not watching any On-line video is another perceived Video on demand is also growingless TV. We love TV. For all the newer threat to traditional TV and it is – especially among youngeralternatives vying for our time, growing, but at the current level audiences – but doesn’t yetwe still spend an average of four of around 19 minutes a day, it represent a marked shift inhours a day in front of our TV sets is not yet making a significant consumption despite considerable– essentially the same amount as dent in traditional TV viewing. And marketing effort. As with PVR20 years ago. In fact, viewing time this viewing time is incremental time shifting, we expect viewers tohas actually increased slightly to standard viewing, not an continue their preference for theirin the past couple of years. And alternative. Plus, 80% of that time TV viewing to be live and of-the-the majority of that time is still is spent watching YouTube or moment.spent watching live, broadcast porn, neither of which can reallyTV. The much-trumpeted shift to be considered direct competitors Factoring in all of these changes,self-scheduling has yet to make to traditional TV programming. we estimate that linear TV will stilla significant dent. Time-shifting Likewise, there are many account for 70% of video viewing inin homes that use PVRs hovers enthusiastic users of broadcaster 2020 (see Fig.1).That is a long wayaround the 20% mark, a lot less sites like itv.com and iPlayer but short of the collapse that manythan had been predicted and the volume of viewing of these is had forecast. Traditional viewing isthere’s little evidence that people still relatively insignificant despite in fact proving remarkably resilient.use their PVRs more the longer healthy penetration.they’ve owned them. 9

In households where people have got many tens of thousands of video on demand we’re still seeing about half of all viewing to fairly traditional, ad funded much of it, shiny floor entertainment television. Mark Thompson Director General, BBC10

Figure 1Estimated video viewing by type2010-2020 (f),Minutes 281 259 19 40 17 48 We believe 70% of ONLINE VIDEO video viewing will TIMESHIFTED TV still be linear in 2020. LIVE TV 223 193 70% 2010 2020 Source: BARB / Comscore / Mindshare estimates 11

What I would say about 2020 is that linear television will still be there. It will take time for the evolution of television into the non-linear world to happen and it’s never going to quite happen like that because we still want to share things together. Alan Yentob Creative Director, BBC12

02 The brand becomes even more important in TVAnother aspect of the current TV Strong brands will increasingly When these technologies take off,landscape that seems in no danger help consumers manage and a strong master channel brand willof being obsolete by 2020 is the navigate the bewildering array of become the access point for manyrole of brands – both channel viewing choices they now face. viewers. The portfolio route takenbrands and content brands. We And the evolution of the electronic by many channels will becomebelieve that strong linear TV programming guide (EPG) is more blurred and arguably lesschannel brands will prosper if, as likely to play an important role important at this point.anticipated, total viewing time in supporting channel brands’holds its current level (see Fig.2). influence. EPGs will evolve toIn fact brand strength will be more feature both “brand zones” andimportant than ever to maintaining recommendation features as well asshare. the familiar listings. 13

Figure 2 Distribution of Revenue Traditional vs emerging media The Big Head Revenue Emerging Media Age Trad Media age ‘Strong TV brands will prosper’ The Sagging Middle The Long Tail Top Bottom14

Big content gets even biggerThe value of a strong content brand And this big content has taken programme, chatting to friends orcan be seen in how well the top 5 full advantage of the rise of social even interacting directly with theprogrammes have held up in the media where it is a natural and programme on a second device,digital era. These programmes popular topic. This creates a kind of whether it’s an iPad or a smarthave lost fewer viewers over the “water-cooler online” effect. Social phone. Social media chatter helpspast 10 years than the rest of the interaction around blockbuster big content get bigger. And socialtop 100 (see Fig 3). For all the content is expected to grow communities provide ready-madefragmentation in our viewing we through the phenomenon of two- fan bases for leveraging contentstill have that communal need for screen viewing - watching linear TV off the back of the most popularthe big blockbuster programme. while monitoring the buzz of a live programmes. 15

Figure 3 TV Viewing Figures by rank (% change 2000 – 2010 ytd) 0 -5 -10 -15 ‘The blockbuster % continues to thrive -20 US* in the digital era’ -25 UK -30 -35 Source: BARB / Nielsen *2001-200916

Mass audience television still has its appealnot just to advertisers but also to the public.There is something about being involved insomething a lot of other people are watchingthat you can talk about the next day. Thecommonly enjoyed moment that everybodycan reflect on together. Sir Peter Bazalgette Former Chairman Endemol UK 17

03 Spot advertising survives as new revenue streams emerge Dual-screen consumption will support live, linear Branded content will grow, particularly for brands with TV – good news for the future of spot advertising. younger target audiences, but it is still challenging in Overall, the continuing growth of pay TV (about 50% terms of transaction costs, the risks involved and its of revenues by 2020) will further reduce the industry’s ability to demonstrate credible ROI. Ultimately there dependence on advertising, but spot advertising will are only a finite number of brands and programming still account for 80% of the reduced advertising total in genres suitable for ad funded programming, and this 2020, we estimate (see figure 4). will also act as a natural ceiling. New advertising revenue streams, namely branded content and addressable advertising, will continue to develop, albeit relatively slowly, because of the higher rates of time-shifting amongst the more commercially valuable audiences. There are a number of factors that will hold this back though.18

Addressable advertising – using data about individual a headache in the context of consumers’ – andhouseholds’ spending habits and profile in order to legislators’ – growing concerns over privacy.serve specific tailored ads to those consumers throughtheir set-top box – is likely to be more fertile ground. Nonetheless, it is an area of real potential and one set to grow, particularly for advertisers who are currentlySky’s AdSmart is probably the best known current heavy users of direct marketing.system. It’s something of a holy grail for advertisers,but it will be 2013 before advertisers are able to tailor We believe addressable ads will generatemessages accurately and to reach credible numbers of much more revenue than branded content byviewers with sufficient accuracy. It’s also potentially 2020. 19

Figure 4 TV industry revenue in £bn, real terms 2010 - 2020 (f) 12 billion 17 billion 6% Other 10% Other 80% Spot 23% Public Funds (BBC) 17% Public Funds (BBC) 24% Advertising 30% Advertising 49% Subscription 41% Subscription 5% Content 15% Addressable 2010 2020 (f) Advertising 2020 (f) Source: Ofcom / Mindshare Estimates20

implications 21

For advertisers Traditional viewing lives on and conventional 2] While addressable advertising is in its infancy, TV spot advertising will continue to be a critical advertisers need to consider how exactly one- medium for many years to come. to-one TV advertising could be used and to experiment with broadcasters and TV platforms The challenge for TV advertisers in the coming as opportunities develop. Advertisers will need to years is twofold: understand their consumers in ever greater detail to truly reap the benefits of targeting. 1] To work out how to use social media and two screen viewing, to leverage their spot advertising in must-view, blockbuster content. How can the 30s spot be best used to drive engagement or interaction on the second screen?22

For broadcasters and platform operatorsBrands will be more important than ever as Developing addressable advertising systemsviewing choices proliferate, so it will become and approaches that are coordinated acrosseven more critical to build channel brands that the industry will cut down on advertiser andtruly resonate and offer a sense of editorial agency transactions costs and encourageendorsement over programme choices. Big brands experimentation.and well-defined niche brands will thrive, but thechallenge will be to avoid the dangerous middleground. 23

I think there will be more opportunities for advertisers to target their potential customers more accurately and I think there will be more opportunities therefore for advertisements to smarten up, to be better focused and to be better directed, not having to cover too many bases in any one message. And so I’m confident that the 30 second spot ad will survive as it has for 50 years, I am sure it will survive another 10. But we will see far more variations on the theme and far more intelligence in the way those messages are communicated.24

David ElsteinFormer Chief Executive Channel 5, Head of programming at BSkyB& Director of Programmes at Thames Television 25

more...26

What’s next for Future of...?In 2012, Mindshare’s Future of... programme follow up its study of television with anaylsis of Mobile,Social, Connected TV and Consumer Choice.To receive these reports on their publication - or to request a place at one of our breakfast briefings oneach subject - please email rsvp.london@mindshareworld.com with your details. Alternatively, you cancontact Jeremy Pounder or Louise Richardson via firstname.surname@mindshareworld.com. 27

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