Coined by a media consultant, bellyvision refers to young consumers who watch TV on the couch with their laptops balanced on their stomachs, all the while IM-ing their friends. Such a fully interactive TV medium allows marketers to forge an up-close-and-personal relationship with viewers, deliver targeted ads and even make the sale online. If traditional TV doesn’t develop the same kind of capabilities, it is in danger of being left behind in the coming years.
Remember the cold water that the anticipated Y2K crisis put on our 2000 New Year’s celebrations? For many of us, it required cutting back on our customary celebrations and staffing up our network operations centers in the event that the Y2K patches we had been feverishly installing failed.
I wonder how many of our viewers were preoccupied with wondering if they had an adequate supply of cash, food and gas for their new generators while they watched the Times Square ball drop. At my house, we are still burning the cord of firewood I insisted that we buy in case we had to use our fireplace for heat during that cold Chicago winter.
While our Y2K concerns may have been overblown, the coming year and decade didn’t hold back on national and industry hardships. It began with the busting of the dotcom bubble, 9/11 and a mild recession; it is closing out with the “worst economy since the days of the Great Depression.”
As many as 75 percent of the industry’s media companies have engaged in some form of restructuring. So who isn’t with me in rejoicing over closing the books on 2009 and getting out of the aughts? As TVNewsCheck so aptly summed up in its year-end reviews, “don’t let the door hit you on the way out.”
MFM members are literally closing the books on 2009. In fact, the association held a distance learning seminar last week to provide some guidance on addressing the various new accounting rules that affect year-end reporting. This year’s changes — things such as treatment of loss-carryforward, revenue recognition and business combinations — seem to be more fine-tuning than overhaul, but are changes nonetheless.
As happy are we are to sing Auld Lang Syne to 2009 and the past 10 years, can we welcome 2010 with less trepidation than the year 2000? While they don’t seem to be encouraging irrational exuberance, many industry analysts say we have reasons to be optimistic about the months and years ahead.
Among those analysts are Chris Nicholls, senior managing director of the communications and media practice for FTI Consulting, and Jason Helfstein, an executive director and senior analyst at Oppenheimer who focuses on the media and Internet sectors. Nicholls and Helfstein provided the media investors’ perspective at the Media Outlook 2010 seminar hosted by MFM and its BCCA subsidiary a few weeks ago.
While last year marked the third consecutive year of unprecedented ad declines, with a $3 contraction for every $1 gained, Helfstein finds several bright spots when looking, particularly in the near term. Many of them are outlined in Oppenheimer’s recent industry update focusing on the shift toward data-driven marketing.
At first glance, you would think that a report on data-driven formulas to guide and justify media buys would be purely in the negative column for broadcasters. After all, Oppenheimer likens this situation to the mid-1970s when broadcasters began to lose audience share, one of its key ad sales metrics, to emerging cable networks with targeted demographics.
However, one of the mixed blessings of the recent economic downturn, as described in my last column, has been the advertiser’s tendency to cut both budgets and expenditures in untested media. Greater levels of uncertainly about the economy mean greater reliance on tried-and-true media.
The Oppenheimer report concludes that this creates a difficult environment for media with poor data and accountability. It encourages investors to focus on companies that are benefiting from such “secular trends” as cable networks and search advertising.
FTI’s Chris Nicholls also talked about the impact of the “double whammy” created by a poor economy and the ad community’s migration toward more efficient — and measurable — media buys. While 80 percent of revenues for established media like the New York Times have been derived by its print version, the newspaper’s 22 million online readers far exceed its print base, representing a great new media marketing opportunity.
Picking up on Helfstein and Oppenheimer’s message that advertisers aren’t analyzing the key drivers in the Internet’s success, Nicholls encouraged seminar attendees to focus on developing sales incentive programs for their legacy customers.
Nicholls also encouraged them to closely monitor the findings in Nielsen’s quarterly “three screen” reports. The question is not if, but how quickly, broadcasters need to develop their online and mobile brands, in order to cultivate the individual viewer relationships that advertisers will increasingly demand. Nielsen predicts that as much as 25 percent of ad expenditures will migrate to interactive media over the next 15 to 25 years, largely at the expense of traditional reach-and-frequency ad buys.
Nicholls’ views are expanded in a recent FTI white paper, Happy Days: Perhaps Gone for Good on Television. The report echoes Oppenheimer’s observations concerning the fragmentation of television audience from 2.9 channels available in the 1950s to the more than 100 channels available on the average television set today. Meanwhile, the time spent with television has grown from 32.5 hours per week in the 1950s to over 57 hours per week today.
But the happy days of spot advertising are fading, the report reminds us. Television has never in its history seen as sharp a decline in ad revenue as it is experiencing today. As the migration of ad dollars to other media clearly points out, advertising effectiveness is no longer viewed as just a function of viewer numbers. Instead, it requires measurable results from a hyper-targeted demographic focus.
I don’t have to tell you that the challenge for traditional TV is to remain relevant in a world where viewers are wresting control of their own viewing schedules, evading advertising and seeking alternative ways to watch their favorite programs. Increasing the pressure to offer these solutions to advertisers are financing valuations that didn’t take into account the loss in revenues.
As a result, the average bid for senior secured debt of TV broadcasters currently hovers between 40-50 percent of par value, according to the FTI paper. Unfortunately, these painful realties are all too well known to most of us.
While we certainly have challenges, it is important to remember that emerging media ventures long to create the type of “stickiness” that broadcasters already enjoy. And, as Nicholls and the FTI report observe, television can, for the first time in its history, offer a business-to-consumer solution.
As the report explains, a one-to-one, anytime/anywhere distribution world allows a viewer to download his favorite weekly TV programs, local news or his kid’s soccer game, creating an opportunity for video content providers to cultivate individual viewer relationships. While customer relationship management for broadcasters historically has meant a focus on the advertisers, in the new media world it can mean a focus on individual viewers — a new concept that FTI describes as “viewer relationship management.”
Bruce Benson, senior managing director of FTI Consulting’s entertainment and media industry unit, talks about this new capability in a paper about “bellyvision.” Benson coined the term to describe the growing number of viewers like his 23-year-old daughter who lie on the couch with their laptops on their stomachs and watch whatever they want to, all the while IM-ing their friends.
Benson views bellyvision as a key strategy for capturing the online video ad revenues that e-marketers estimate to grow to $4.3 billion in the U.S. by 2011. To put this in perspective, online video ad revenues were only $700 million in 2007. As Benson notes, this is a lot of new revenue in just three-and-a-half years.
While many of us may think PC viewing can’t compete with big screen TV, Benson reminds us that viewing a 17-inch PC screen that’s 24 inches away is just as good as a 52-inch screen from 10 feet away. It also caters to consumer demand for personalized media.
In addition to online ad models, bellyvision’s B2C capability allows video content providers to generate e-commerce revenues by supporting such transactions as selling T-shirts and full-season DVDs for their favorite TV series. Companies like Backchannel Media and icueTV are already demonstrating their ability to support these opportunities and thereby relieve local stations from investing in the technical architecture and back-office integration that would otherwise be required.
As Oppenheimer’s Helfstein told seminar participants, the tipping point between TV, Internet and mobile has yet to occur. Media companies still control most of the relevant content, while social networks and long-tail sites are still trying to prove their data-driven traffic is “monetizable.” As a result, TV still garners about 250 percent more viewing than online video and as much as 900 percent greater usage than mobile … so far.
Helfstein and others also point out that newspaper companies were much more aggressive than broadcasters in seizing the opportunities for extending their brands to the online platform and monetizing those opportunities. Broadcasters are in danger of being left behind if they do not launch the new initiatives that open the door to these B2C opportunities. As Greater Media CEO Peter Smyth told MFM’s 2009 annual conference attendees, “You can’t cost-cut your way to the future.”
These messages weigh heavily on the industry’s financial management executives as they close the books on 2009 and sharpen their companies’ financial plans for 2010. It’s interesting to note that, just 100 years ago, at the onset of the 20th century, broadcasting technology was largely viewed as “wireless telegraph.” And as we know, it wasn’t the telegraph companies that created the vibrant radio and television industries that emerged from that invention over the next 90 years.
The advantage is ours to loose. How closely today’s television industry is associated with the future of what we currently describe as “TV everywhere” is up to us. So here’s to welcoming the New Year with optimism and excitement for what it holds. The staff and leadership of MFM stand ready with a host of educational programs and opportunities to share information, all intended to help you make yourself and your company successful in 2010 and beyond.
Mary Collins is the president and CEO of the Media Financial Management Association, a professional society addressing the diverse needs of the industry’s financial and business professionals. Her column appears here every other Friday.