5 commercial lessons from the TV industry

You hear a lot about what lessons TV could learn from the digital world. Some of these things are valid, some are debatable, and some are just ridiculous.

Future premonitions aside, TV is a pretty sound business generally run by pretty smart people. In my role, I am often looking at what the TV companies are doing for ideas on how to package up our product and how to engage advertisers. Some may think this is crazy, others may think it’s terribly backward. Maybe it is.

Then again, maybe it isn’t.

TV, especially free to air, is undoubtedly the biggest global media player. And despite many predictions, it is still relevant and still compelling for most people on the planet.

But, most importantly, TV is very good at monetising its audience. It’s very good at packaging up its ad products and it’s incredibly good at maintaining advertiser confidence despite having nothing even resembling a ‘click through’.

So why is TV still a good business? No, a great business.

1. Scarcity. There’s only so many FTA licences around. This helps the TV industry. Also, generally the government sets a maximum amount of adspace the networks can sell – this creates inventory scarcity. Whilst it may sound foreign to limit the amount of ad space, for TV this is a huge positive and has allowed them to charge more per viewer year after year. Lastly, scarcity in programming is a big help. There’s only one network with Masterchef. There’s only one with Packed to the Rafters. Only 2 have the AFL. Only one has NRL. Only 1 has Top Gear. If you want these programming environments you need to engage TV. Scarcity is the single biggest strength of TV and no doubt a reason why the likes of Murdoch, Packer and Rinehart have invested in TV of late.

2. Investment in programming. The networks invest a heap in programming and any investment they make in technology (aside Digital TV) is generally kept behind the scenes. Why? Because they realise Joe Schmoe only really cares about the programming and they know that Joe Advertiser only cares about ratings and engagement, not spin. TV networks will front up significant investment to secure key programming. And if this investment isn’t working, they are quick to pull the trigger and take it off the air. The reason you probably wont see a World Cup ‘Internet only’ for at least a few decades is due to the upfront investment (not to mention excellent implementation) required. TV understands that to hold audience and hold advertisers (especially now) they need to more assertive than ever with bidding on key programming. I don’t think the Demand Media idea of cheap and cheerful content would be embraced by TV.

3. Excellent, assertive sales and great execution. TV sales people, especially senior ones, are super impressive. They can sell. They own the relationships with the agencies and advertisers. They aren’t bullied. They expect transparency with advertisers. So much so that they request access to agency TV spends to verify their share in order for them to offer the volume discounts they do. Plus their execution is great and a clever TV sponsorship will generate very solid recall. Lesson here is, ideas and selling are great, but they require sound execution.

4. One ad at a time. Imagine running 10 TV ads at the one time. All competing for the users attention. All flashing. All with different text. Sounds a bit much doesn’t it? Now, imagine one ad at a time … on screen solo for 30 seconds. The ad doesn’t compete with anything – not programming, not other advertisers. Advertisers like TV because when their ad is on it is the only ad on the screen. This is a simple but highly compelling idea.

5. It acts ‘big’. TV has a swagger about it that I believe contributes greatly to its continued success. People like James Warburton and David Gyngell are active in the press. They are bullish about their industry. Each year the ‘showcases’ are generally large, extravagant affairs which attract key decision making clients. Sound wanky? Maybe. But it shows confidence and commitment too.

So whats the lesson here aside the fact I am impressed with TV. The lesson is that you can build a really strong business on what are often called ‘excellent fundamentals’. TV has excellent fundamentals. This in turn creates trust and this trust allows for positive long term momentum with both users and advertisers.

These fundamentals? Product scarcity. Great salespeople. Sound execution. Investment in programming and Advertisements with impact.

What I’d like to see aside people telling the TV industry how to run itself (with all due respect I think they are doing a pretty solid job at appeasing viewers, shareholders and advertisers), is to see really great, emerging media brands (digital/magazine/radio) extend themselves onto TV.

With the rise of the multichannels this is a very real opportunity.


2 responses to “5 commercial lessons from the TV industry

  1. Excellent post Ben.

    As you correctly say, their business models are robust and continue to pass the test of time. The $2.4b of MTV advertising revenue is shared among 3 players (if you exclude SBS) and the $0.75b of RTV advertising revenue is also shared among a handful of players. In contrast, how many players are fighting over the $2b of online revenue of which Google is probably getting at least a half via search?

    TV also understands that content is king. When they broadcast a programme it receives 100% of the screen (apart from those annoying screen crawlers) and when the clients ads are on the ad is given 100% of the screen as well. This is also why they spend hundreds of millions of dollars a year each commissioning or acquiring new content. It is also why they are keen to control the distribution channels to protect their investments (viz. the recent Google TV knock-backs.) Savvy media planners and advertisers also factor in the ‘screen domination’ effect for when the ad is screened. And yes, live ad-avoiders and playback ad-avoiders are also factored in by savvy media planners (but I fear by not as many as should be – stay tuned for developments there).

    I think the big questions for online are:
    * Who has the kahunas to commit significant amounts of dollars to commissioning world class entertainment and content? There IS an opportunity here as sincreasing amounts of content on TV ‘dumbs-down’ to cat-on-a-keyboard video levels.
    * Will there be industry rationalisation of the supply side of the equation? The surfeit of supply drives down CPMs, CTRs etc. What impact would this have on ad networks etc? Does anyone have the appetite to even test upping their CPM and reduce their gross number of impressions – quality over quantity?
    * While TV can sell 100% of the screen for 15 seconds, will this be accepted online? Given the public reactions on blogs to screen take-overs (and a personal hate of mine) I suspect that the answer is no as online is inherently a pull medium of immediacy whereas TV is a push medium of grazing.
    * Will there be rationalisation in the industry to create content companies of sufficient size to invest in first-run content?

    Keep up the thought-provoking work!

  2. Great post, Ben! Your writing is exceptionally clear. And great comment, Jono.

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