After years of feeling threatened by technology, executives in the television business are seeing paths to profits from changes in the way viewers are consuming programming.
The threats have been clear: While Netflix and Amazon and other over-the-top streamers would steal viewers, Google, Yahoo and other online powerhouses are pushing to do upfront deals, grabbing TV ad dollars, and DVRs like Dish Network's Hopper and its auto-hop feature could make watching commercials a thing of the past. But for 2013 at least, traditional TV has stood its ground, and that should continue in 2014.
Ads and the Economy
On top of a slowly improving economy, ad spending will get a boost from the Sochi Olympics and midterm elections in 2014. And among media, TV seems to be standing up to the shift to digital better than other traditional forms. In a recent forecast, Interpublic Group's media-buying unit, Magna Global, said it expects 8.6% growth for TV spending in the U.S., with national TV up 4.3%. TV ad spending has been buttressed by new research techniques that come closer to pinpointing the return on investment advertisers get when they buy commercials-something marketers believe they get when they advertise online.
Cashing in on Delayed Viewing
Compared with the 2012-13 season, when viewership for the broadcast networks dropped sharply, ratings, especially commercial ratings, have been stable. And without falling ratings to worry about, networks have turned their attention to measuring and monetizing more of the delayed and on- demand viewing of their programming. CBS CEO Leslie Moonves continues to agitate for using C7 ratings- which would include commercials watched during DVR playback for seven days after air instead of the current three counted in C3 ratings. The change would benefit some programmers more than others. Broadcasters would cash in because network shows account for about two-thirds of DVR playback, while 39% of live viewing goes to cable. Sports networks, powerhouses in other departments, would see scant gains from a change in the ratings currency.
Dollars on Demand
While the DVR has long been seen as a threat to advertising, TV programmers are enamored of VOD, especially as part of the TV Everywhere ecosystem, which has been slowly but surely developing. VOD deals with cable operators call for the fast-forward button to be disabled, which means subscribers almost have to watch commercials. Comcast, which, not incidently, owns NBCUniversal, says that commercial ratings are much higher in its markets than elsewhere, because of the way it has been pushing VOD. During last year's upfront, many networks sold VOD ads, believing that in 2014, dynamic ad insertion, which enables cable operators to insert new commercials into older shows viewed on-demand, should reach critical mass.
Young and Online
On top of that, more viewers are finding network shows online on those network's websites. That allows the programmers access to the younger viewers who aren't watching on traditional TV. CBS says viewers of its content online have a median age of 40, or 16 years younger than its on-air viewers. Both online viewing and TV Everywhere should get a boost from Hulu, which owners Disney, 21st Century Fox and Comcast decided not to sell and named longtime distribution exec Mike Hopkins to run.
Fees Going Up
CBS' beat-down of Time Warner Cable in their retransmission battle in August was a harbinger that retransmission and other carriage fees are likely to continue to rise in 2014. Speaking at an investor conference in December, 21st Century Fox COO Chase Carey said the company is getting only a fraction of what it should receive and that fees should be an area of long-term growth. And the networks expect affiliates to kick in their share of retransmission costs. When CBS hired Elizabeth Tumulty as president, affiliate relations, it noted that a key part of her job would be ensuring that CBS receives full value for its content.
Wall Street Is Watching
In a rising market, TV stocks have been among the best performers. Wall Street likes predictably rising fees and steady ad revenue. Even better, investors like the way media companies are taking the profits they're making and returning them to shareholders in the form of stock buybacks and dividend increases. Add in the possibility of mergers and acquisitions creating a more consolidated business and things are likely to be looking up in 2014 from a financial perspective.
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After years of feeling threatened by technology, executives in the television business are seeing paths to profits from changes in the way viewers are consuming programming.
