MESSAGE
| DATE | 2003-02-17 |
| FROM | Kevin Mark
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| SUBJECT | Subject: [hangout] NBR -- story on advertising revenue and the TIVO
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http://www.nightlybusiness.org
goto Feb 17,2003
02/17/03: The New Trends & Challenges
02/17/03: One On One With Hank Kim of "Advertising Age"
PAUL KANGAS: Over the past century, advertising has provided the lion's
share of funding for America's commercial media outlets, ranging from the
local newspaper to network television. And for their part, the media have provided audiences for the advertisers' messages.
SUSIE GHARIB: But new developments could threaten that long-established
business model. Although events like the Super Bowl still attract
millions of viewers, it's getting harder for traditional media to deliver sizable audiences.
New York bureau chief Scott Gurvey reports on these trends and the threat they could post to advertising-based media.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: When you read a
newspaper, you can't help but see the ads. When you page through a
magazine, the ads are often more eye-catching than the rest of the content.
Television? Well, sometimes there seem to be more commercials than program.
But new technologies have changed the way we use these traditional forms
of mass media. They have also created many alternative forms of media, fragmenting the audience.
The result has been turmoil on Madison Avenue, where advertising firms and
their clients struggle to get their messages in front of as many eyeballs as possible.
DAVID DOFT, MEDIA ANALYST, CIBC WORLD MARKETS: There's been an evolution
over the last, you know, 10, 20 years, even more. And the evolution in
advertising is really a migration already away from mass media toward more
targeted forms of marketing communications. And the reason for that is really because of fragmentation of media.
GURVEY: In response, advertisers have created banner ads for Internet
sites, as well as the more obnoxious pop-ups. Pitches by electronic mail
have spread like kudzu, flooding online mailboxes. And in this electronic
age, direct mail has never been stronger, pouring tons of paper on postal patrons.
For television advertisers and broadcasters, audience fragmentation is not
the only challenge they face. It has for decades been possible to fast
forward a videotape recorder past commercials. Now, computer-based
personal video recorders, called PVRs, make avoiding commercials as simple
as pushing a button. TiVo (TIVO) and Reply are the leading brands for PVR devices.
MICHAEL RAMSEY, CO-FOUNDER AND CEO, TIVO: You know, people talk a lot
about, you know, skipping ads or fast forwarding through ads and what does this do to the television industry and so on.
And we've spent a lot of time with television networks, with content
companies, to education them on what we're doing in a way that hopefully,
while they may be, you know, concerned about this technology being
disruptive, that at the end of the day they see the potential of the technology and will embrace it.
GURVEY: The industry does not appear to see it that way. It has reacted with outrage.
Turner Broadcasting CEO Jamie Kellner is quote in the trade journal,
"Cableworld," saying, "Your contract with the network when you get the
show is you're going to watch the spots. Any time you skip a commercial, you're actually stealing the programming."
We tried several times over the last few weeks to arrange an interview with Kellner. He declined.
Kellner is not alone in fearing the threat posed by PVRs. The TV networks
are joined by virtually every major film studio in a lawsuit against
Replay. The suit claims, among other charges, that Replay's commercial-advance feature violates copyright laws.
Lawyers representing the plaintiffs declined our interview requests. So did the Motion Picture Association.
Quoted in "California Lawyer," Replay's defense attorney replies, "If
dodging commercials is against the law, you'd have to strap people in their chairs and snatch the remote out of their hands."
Still, the threat to the traditional commercial television business model is clear.
DOFT: We surveyed about 800 people, about 10 percent of which were PVR
owners, which is a bit higher than the country as a whole. But we found
that three-quarters of those people were skipping commercials.
GURVEY: With the Supreme Court already on record allowing as "fair use"
the recording of broadcast television programs by individuals for a later viewing, this lawsuit seems a long shot.
That leaves the TV industry to search for other ways to serve advertisers
and advertisers to seek other methods of delivering their message.
SAMUEL CRAIG, MARKETING PROFESSOR, NEW YORK UNIVERSITY: The advertisers
have lots of different options. They can choose other media to reach
consumers that are TiVo-proof. They can use radio, magazines, outdoor,
point-of-sale, and sales promotion. So they have different options, they have different ways of reaching their target audiences.
GURVEY: Historically, most technological change has been disruptive. But
it has also been unstoppable. So the media landscape could be in for even bigger changes.
Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
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02/17/03 One On One With Hank Kim of "Advertising Age"
SUSIE GHARIB: Well, as Scott Gurvey pointed out, television viewers have
had the ability to bypass commercials for some time. Still, advertisers
haven't abandoned TV, and predictions that the Internet would replace it
as the next great advertising medium haven't yet materialized.
So, are the doom-and-gloom warnings about the impact of personal video
recorders justified? I asked Hank Kim, an editor at "Advertising Age"
magazine, whether there really is cause for the media community to be concerned.
HANK KIM, EDITOR, "ADVERTISING AGE": I would say they're a cause for
concern but not a cause for alarm. While the technology does have the
potential to completely change and revolutionize the network TV business
model as we've known it for decades, it still hasn't gained enough
traction among the general consumer base for it to really be a cause for alarm.
GHARIB: Hank, you've written that the Internet can now be considered a
viable advertising medium. And yet, we've seen so many
advertiser-supported websites fail because of a lack of advertising. So why the disconnect?
KIM: Definitely Web publishers are groping for a business model, and they
cannot obviously rely on advertising as their main source of revenue.
That's why you see a lot of them trying to do more in terms of generating
alternate revenue streams through e-commerce. AOL (AOL) is -- that's something that they're really focusing on, going forward.
So there are obviously hybrid forms. But advertising is still, like I
said, it's a growing revenue source. It was, you know, debunked by many
during the boom and bust cycle, but I don't think it's going to go away.
I think it's definitely here and it will continue to grow.
GHARIB: Bruce Redditt of Omnicom Group has said that the new consumer is
a severe challenge for traditional media-buying practices. In what ways
are baby-boomers and the younger generations, X and Y, more advertising resistant?
KIM: They're not necessarily advertising resistant, but they are
resistant to stuff that bores them. There's just so much more messaging
out there on a daily basis that the average consumer is exposed to that they have much more choice.
So if you're not -- if you as an advertiser or a content producer do not
get the attention of the consumer, do not engage him in a compelling way,
you'll lose that person. And I think that's what Bruce was probably referring to.
GHARIB: Well, on exactly that point, you know, many ad executives are
saying that in order to get the attention of these younger consumers so
that they don't tune out, that you're going to have to approach ads in a different form.
How is that going to affect programming?
KIM: Because of devices like TiVo and Replay that allow the consumer to
zap the commercial, advertisers are now trying to circumvent that by
actually embedding their commercial message into the programming, into the actual show.
So whether it's a scripted comedy or a reality show, advertisers' goals
are to basically get their brand, whether it's a can of Coke (KO) or a
Microsoft (MSFT) XBox, whatever the brand or product may be, into the
actual content of the show. So that way, they can actually still get their product in front of the consumer.
GHARIB: But isn't there a danger (INAUDIBLE) trying to sneak in your
advertising into programming, this "advertainment," couldn't this backfire? Don't you have to draw a line somewhere?
KIM: Absolutely. Absolutely. And you can't just gratuitously place any
brand in any show. The brand really has to reflect the particular show.
There has to be common ground in terms of a particular episode, the context, the scene.
I mean, it really gets down to really looking, you know, micro-analyzing
the script and the brand and seeing where the sweet spot is. Because
there's only so far you can do before consumers will throw the remotes at the TV and walk out of the room.
So yes, you do have to be very careful in how you do it.
GHARIB: We've seen situations where a viewer is given a choice between
watching a program or a website free with commercials or to pay a fee so
that they can watch the program without commercials. Do you see this as the business model for the future?
KIM: Well, as it relates to the TV industry, it's actually already going
on, because, in effect, HBO is the perfect example of the model that you
described. So I think that's already proven to be successful, and I think
we'll probably see more attempts at that down the road.
The web is another matter. I think the jury's still out. But I think it
is definitely enticing for certain people, the ability to not have -- or
the opportunity to not have to deal with an advertiser's pitch. I think
people will -- there will definitely be people out there who would be willing to pay money to avoid that.
GHARIB: We've been talking a lot about television advertising, but what
about print media, newspapers, magazines? Are they also threatened?
KIM: They're not dealing with the same technological issues that the TV
industry is because there is no way of zapping commercials in a magazine.
If you buy the magazine and you flip through it, you will see the ads.
You don't have to spend too much time focusing on them, but they are there.
I think, though, the commonality though is that magazines also face media
fragmentation and media clutter, just like the TV industry does.
GHARIB: Hank, thank you very much. We appreciate your insight.
Nightly Business Report transcripts are available
on-line post broadcast. The program is transcribed by eMediaMillWorks.
Updates may be posted at a later date. The views of our guests and
commentators are their own and do not necessarily represent the
views of Community Television Foundation of South Florida, Inc.
Nightly Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2003 Community Television Foundation of South
Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
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