Content Insider #896 – Dumb Genius
By Andy Marken – andy@markencom.com
‘In situations like this, carelessness, mistakes–they will haunt you. I know this from experience.” – Walter O’Brien, “Scorpion,” CBS, 2014- 2018
There’s nothing harder to break than a bad habit.
The wife knows…she’s been trying to change a bunch of ours for years.
She just can’t understand that we really like our bad habits.
The same is true for TV networks and bundle providers.
CBS/Fox and Comcast/Spectrum were developed to deliver video entertainment to the home … for a fee.
Then:
– shareholders wanted a bigger return on their investments
– everyone in the content creation pipeline wanted to be paid for their work
– bosses wanted more pay because they deserve it
To meet the growing viewer demands and higher costs, they raised their fees. Just a little every now and then …who would notice?
Wall Street and bosses “needed” more so they added ads. Just a few and then a few more and more … who would notice?
The bundle got too expensive, and it felt like there were more ads than entertainment (20 min/hr.)
Folks dumped their bundles and bought into the Silicon Valley start-up’s idea of watching movies/shows anytime they wanted on any screen.
Disruption – Netflix changed the way folks watch shows/movies and consumers liked the convenience … just not always the increasing subscription fee.
Studios and networks figured out that going direct to the viewer was a great way to make even more money, so they jumped into the game.
But just in case, they kept their stuff in the cable bundles and theaters.
More, More – Since every network, studio and streamer felt their content was so valuable, they didn’t want to share access to others. Consumers have a choice … sign up for everyone’s stream or be selective. Somehow, we need to get back to bundles that normal people can afford.
Folks couldn’t sign up fast enough, even if they didn’t have more time to watch the shows/movies. According to PwC, streaming subscription growth is projected to slow its growth from 1.8B last year to 2.1B in 2028.
But average revenue per subscription is projected to barely grow from $65.25 this year to $67.77 in 2028.
Investment – While they are under pressure to be ultra profitable, streamers also have to continually introduce new shows/movies to interest/attract/retain subscribers.
Knowing that it costs money to make money, the networks, studios and streamers kept investing in new content to keep folks from reducing their home entertainment budget by “adjusting” the services they used.
The home budget got so bad that some people even shifted most of their entertainment time to newer streaming services – Pluto, Tubi, FreeVee, Roku, Kanopy, Plex and others – that figured out that folks would put up with “a few ads.”
Of course, the viewers wouldn’t get any of the new shows/movies any time soon but the price was right … free.
Since free was a ridiculous idea for the services that were constantly investing billions in new, breathtaking content and constantly raising their subscription fees was becoming tough when you gained one subscriber but lost two.
It called for a really creative senior management solution … reasonable fee plus “a few” ads.
O.K., so video content advertising isn’t a really creative senior management solution.
In fact, it’s been the go-to mass marketing solution ever since Bulova ran the world’s first TV ad back in 1941 during the Dodgers/Phillies game.
No, it wasn’t really spectacular, just the watch face over a US map with voiceover saying, “America runs on Bulova time.”
Of course, Dunkin’ Donuts has recently laid claim to that statement but whatever.
Certainly, it wasn’t as spectacular as Apple’s famed 1984 hammer toss during the Super Bowl.
It was also a helluva’ lot less expensive to make and run.
If you’re curious, the Phillies won.
But it did set the stage for a new phase of marketing/advertising. Local/national TV services and marketers around the world couldn’t get enough.
It didn’t matter if 80-90 percent of the folks weren’t interested in what was being promoted, companies were buying numbers.
Since we’re not one of those “can’t tolerate” ads people (like two of our video game-hugging friends), choosing ad-supported was an ideal way to realign our streaming budget.
Actually, we didn’t do it to save money. As our wife – and kids – will tell you, we’re a helluva impulse buyer.
See something that strikes our fancy and BAM! we will probably buy it which is probably best exhibited when we return from the grocery store.
But we sorta missed ads, not the waterboarding ads the cable bundle used to put us through every hour and not the constant repeat of the same ad again … and again … and …
We couldn’t tell you who the advertiser was 15 minutes after the ad ran but we could anticipate who was going to say what after a couple of appearances.
Funny how that works.
We rationalized it to our friends noting, “Geez guys, it’s only 3-4 minutes an hour and they’re different because most advertisers no longer have to focus on CPM (cost per thousand) rather than ads that are focused on people with a certain “customer” profile. Besides, we like a little break during a show.”
We also know … if we’re not buying/paying for the product … we’re the product.
But with streaming, things are different (or should be) because streamers have a greater understanding of their audience.
There are content folks and the social media you use constantly – Instagram, Tik-Tok, WeChat, YouTube, SnapChat and a bunch of others you can’t ignore because of your FOMO (fear of missing out).
But there’s a difference.
Back when Netflix started out keeping track of your online viewing habits, they had a different goal.
Knowing what you watched, how many minutes you watched, when you watched and when you watched gave them the information they needed to acquire or develop more and similar shows/movies to keep you connected with them.
Yeah, they – and all streaming services – know stuff … lots of stuff.
Understanding – In today’s online world, streamers are able to have a better understanding of who is watching, what they’re watching, when they’re watching and the screen they’re using. That information also helps advertisers do a better, more efficient, more effective job of reaching consumers.
That data enables them to recommend new movies/shows you’ll probably find interesting so you’re not wasting time clicking through their library hoping to find something/anything to waste an hour or two watching.
After all, that’s just one of the reasons most people dropped their day/time pay TV for streaming.
It also helps them to know when you switch viewing screens so they can adjust the data stream to enhance your movie/show viewing experience and optimize content delivery.
It’s not at all like your social media data which they use to sell you something or sell your data to someone else to sell you stuff.
What You Want – When it comes to viewer satisfaction, it’s more than just the movie/show people want to watch but also the way it is presented to the viewer.
No, they first use the data to smooth your streaming with a little buffering so you can enjoy the highest video quality resolution possible.
They also keep track of what you watched so they can recommend similar stuff.
After all, you don’t want a bunch of entertainment … you want your entertainment.
It should go without saying that they also want to keep your information safe and secure because … you expect them to.
Since home entertainment budgets are tight for everyone, constantly increasing fees was out as a solution. And a modest fee, combined with a limited number of very focused ads, was a viable option for just about everyone.
Fair Trade – Some consumers are willing to trade a few minutes of their time if they are paying less to watch the content. Others … not so much.
As a result, even streaming leaders like Netflix (277M plus worldwide) have had to reshape their business models and find new revenue beyond just more subscriptions.
But after escaping the pay TV packed service, people who can drop/add services in the blink of an eye expected more from their streaming services.
Ad Features – Because advertisers can now have a better understanding of people who are watching the entertainment (and ads), consumers also expect them to do a better job of marketing to them.
A lot more!
People who dropped the dumb, expensive bundle expect “a modest number of ads (usually 4 min or less an hour).
Today, all of the leading global and regional streaming services offer ad-supported services with a modest number of ads (usually 4 min/hr or less), a ratio most of the leading services have so far said they will maintain.
While viewing has shifted to streaming, advertising hasn’t followed the customer because they don’t fully understand their best prospects/suspects and they don’t understand how to take advantage of the service/viewer relationship.
It’s difficult for everyone in the marketing chain to grasp and believe there is more value in reaching 10-100 real prospect/suspect customers as opposed to 100,000 – 1M plus people in a crowd.
Data helps them do that once they fully understand their customers.
It’s tough for the marketing/ad folks to appreciate the fact that they need to reach that individual when they are watching their show/movie rather than buying a day/time slot and hoping whoever is watching is interested.
As Steve Lanzano, president/CEO of TBA (Television Bureau of Advertising) said, “It’s a beautiful thing when the product message and the viewer come together at the same time.”
low Growth – While consumers appreciate lower subscription fees when they sign-up for an advertising supported streaming service, marketers are finding it difficult to embrace individual focused advertising vs. mass marketing.
According to PwC, almost half (47 percent) of US content viewers are using an ad-supported streaming service (AVOD) at least monthly; but US advertisers are spending a mere 8 percent of their ad dollars on streaming, $4.6B out of a total spend of $71.6B.
Big Return – As consumers and advertisers begin to fully understand and appreciate the benefits of ad-supported streaming, streaming services will be able to produce a greater return on their content development and delivery services.
But according to PwC, those ratios will shift as soon as marketers and advertisers increase their understanding of the power, capabilities and influence of creative, targeted and influential/entertaining ads–Especially when business managers understand the real value difference between eyeballs and dollars.
Improving Ads – People who were born online expect to have better advertising quality and service. Streaming will stimulate advertisers to do a better job of understanding, reaching and interacting with consumers.
Advertising on streaming services will increasingly become more credible and more valuable to marketers.
Early adapter audiences (Gen Z/Alpha) are already experimenting with and embracing new more addressable/shoppable advertising.
Generative AI is already inspiring a wave of business model reinvention and streaming services will play an important role in providing a common ground to enhance that relationship.
Or, to put it more simply, it’s better and easier to connect with consumers on the platforms where they spend more of their time.
Relying on his advanced IQ, Walter O’Brien explained the new relationship in Scorpion when he said, “I’m simply expediting things through technological intervention.”
For us mere mortals, he added, “There’s no such thing as luck, only good science and math.”
Since we were never good at science and math, we’ll just count on really good films/shows to bring everyone together.
After all, we look forward to expanding our bad habit of watching/enjoying good ads.
We just don’t want ‘em like the good old days – lots of them with a little content squeezed in between..
Andy Marken – andy@markencom.com – is an author of more than 800 articles on management, marketing, communications, industry trends in media & entertainment, consumer electronics, software, and applications. An internationally recognized marketing/communications consultant with a broad range of technical and industry expertise especially in storage, storage management and film/video production fields; he has an extended range of relationships with business, industry trade press, online media, and industry analysts/consultants.