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For TV Marketers, Viewers Are Now a Moving Target

Posted on: Sunday, 29 October 2006, 06:00 CST

By Jennifer Mann

In another time, a 25-year-old like Royce Tenney might have spent a good part of his nights at home chomping Cheetos and soaking up hours of prime-time television.

Instead, Tenney and millions like him are watching both traditional TV shows and content found only on the Internet via their computers, cell phones and MP3 players -- choices that are sending shock waves through the traditional media and advertising industry.

Last week, Tenney rushed online to catch a clip of Lawrence Tynes kicking the Chiefs' game-winning field goal against the Chargers just minutes after the game had ended.

Other times he logs onto the social networking site MySpace.com or watches film clips on YouTube.com, where homemade and sometimes pirated videos are often shown. Or he might check out cartoons on AdultSwim.com or visit history and political Web sites for bits to post on his blog.

"I have to be near a computer at all times, not just for work but for personal reasons, too," Tenney said. "There's maybe not an hour or two at the most that goes by that I haven't checked in on my computer."

Tenney illustrates how new technologies are disrupting long-standing connections between companies marketing their wares and their target consumers. Increasingly, consumers control where and when they view video entertainment. Even less tech-savvy viewers are using systems like TiVo to record programs and watch them on their own terms, perhaps without the commercials.

Such shifts in how people consume information are reshaping the economics of media, forcing players in print, radio and TV to reconsider their delivery methods and whether they can generate enough revenue to provide compelling, quality content for their customers.

Nowhere, though, is the change being felt as quickly and keenly as with traditional TV networks, cable stations and the advertisers that make their existence possible.

Shortly after Google bought YouTube.com for $1.6 billion, NBC Universal announced it was cutting spending on prime-time production and putting more money into alternative media. Disney, meanwhile, is reportedly considering a network to stream Disney-created content.

"There's a lot of experimentation going on right now, both for the networks and cable channels, and the marketers as well," said Stacey Lynn Koerner, president of the Consumer Experience Practice, part of behemoth advertising company, Interpublic. "It's wide open. Really, it's like the Wild West."

Having it my way

Some numbers are scary to traditional networks.

Data compiled by the University of Southern California Annenberg School's Center for the Digital Future found that in 2005, almost two-thirds of Americans -- about 200 million people -- had Internet access at home, up more than 41 percent from 2000.

Furthermore, 78.6 percent of Americans, about 235 million, were online last year â€"â€" at home, work or elsewhere â€"â€" an average of 13.3 hours per week, up more than 40 percent from 2000.

Internet users also are loyal to the Internet, with 39.4 percent of such users saying they would give up their cell phones over the Internet, and 32.7 percent saying they would give up their TVs.

The annual study also found that nonusers of the Internet watched an average of 6.2 hours more TV a week than Internet users, concluding that "the only principal social activity that seems to 'suffer' from Internet use is TV viewing."

Those accelerating trends are beginning to affect content and delivery methods.

Ten days ago, NBC Universal, a unit of General Electric, announced it would eliminate 700 jobs, slash its news budget, and cut back on high-cost dramas to save $750 million annually, some of which it would put into alternative media.

But in an interview in Advertising Age, NBC Universal Television Group Chief Executive Officer Jeff Zucker acknowledged it was impossible to know where to invest that money, just that the network had to be positioned to pounce.

Even today, Zucker said, NBC is doing things that just a few months ago would have been unfathomable. For instance, the network's hit show, "Heroes," which airs at 9 p.m. Mondays, is available on its Web site NBC.com four hours later with commercials, and by noon Tuesdays for a 99-cent download at Apple's iTunes store without commercials, then rebroadcast at 7 p.m. that same day on the specialized Sci-Fi cable channel.

"Four months ago," Zucker said, "the immediate exploitation of a show would have been unthinkable."

For all these efforts, someone like 16-year-old Paseo Academy student Bryce Gamble remains a stiff challenge.

Gamble is not a regular viewer of network or cable channels. He occasionally catches an episode of "My Name is Earl." He sometimes watches the news, and likes movies on demand and the Adult Swim cable cartoon shows.

Otherwise, he is usually accessing the Internet, spending one to three hours a day online for entertainment, browsing messages and videos. He also downloads skate and hip-hop music videos to his cell phone or iPod, and will occasionally indulge in a 99-cent music video download, although he typically looks for free content.

"This summer I spent a lot of time on the Internet, but I had to cut back some after school started," Gamble said. "But there's a lot there to keep you online."

Not dead yet

Advertisers, like the networks and cable channels, are grappling with these fast-paced changes, including how digital video recorders are already changing the way people view TV and whether they are watching their commercials.

In June, when advertisers started negotiating with networks over the cost to advertise on their shows, the networks wanted to include new TV audience tracking data from Nielsen that included the numbers from shows played back on a DVR.

Nielsen's data showed that programs viewed on the same day they were recorded added a tenth of a point to ratings, while those viewed within seven days added another one-tenth of a point -- fractions of points that could mean millions of advertising dollars for some networks.

But advertisers balked, unsure how much their commercials were being watched on playback. In the end, advertisers won out. Sanford Bernstein analyst Michael Nathanson estimated that ABC, CBS, NBC, Fox and CW collectively left $100 million on the table by capitulating to marketers.

Such losses threaten to limit the resources needed to create compelling content. But Sheree Johnson, senior vice president and director of media services at Kansas City advertising agency Nicholson Kovac, said speculation on the impending death of TV has been greatly exaggerated. After all, shows such as "Grey's Anatomy,""Dancing With the Stars," and "CSI," each drew more than 20 million viewers for the week ended Oct. 22.

Johnson also agreed with Nielsen's numbers that new technology was actually prompting people to watch more TV precisely because -- as with the Internet -- DVRs give people control over when they watch their favorite shows, although there is little data on how many skip through commercials.

"Yes, communicating with consumers has become more complex and because of the new choices, there's been a lot of doom and gloom about the impact on television in particular," Johnson said. "The numbers are saying marketers would be wise to not throw the baby out with the bathwater -- that the impact of new technology has been overstated and that a reality check has to go on."

Kirk Black, vice president and general manager of CBS affilates KCTV-5 and KSMO in Kansas City, did not see the Internet as a threat to his business model, so long as the content drew viewers.

"Our viewership is at a 10-year high," Black said. "We've got better programming on the station and there's been tremendous improvement in our news product."

But Matt Wasserlauf, chief executive officer of New York-based Broadband Enterprises, an online video distributor and ad-selling network, has been watching as change has slowly taken place since the company was created in 2000.

Wasserlauf's company recently signed Honda and Monster.com for a second season of the Internet-only show, "Cube Fabulous," because "the numbers were there ... deals like that from big-name marketers is sending a message to others."

Now, Wasserlauf said, the industry is at an inflection point. Change is going to come rapidly.

"It's still early in the game, but it's exciting and I think we're going to start to see in 2007 a lot of change," Wasserlauf said. "I think we're going to see that first big hit for the Internet, that first 'Seinfeld.' "

To reach Jennifer Mann, call (816) 234-4453 or send e-mail to jmann@kcstar.com.

Source: The Kansas City Star (Kansas City, Missouri)

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