As recently as two decades ago, terrestrial TV stations could be confident that consumers would tune in to watch the latest ground-breaking documentary, and that the battle for the prime-time advertising slots by top household name brands would secure revenue streams.
But a lot has changed since then. A relentless march towards super-connectivity has led to a tangible change in how (and when) people are consuming entertainment. Thanks to developments in broadband infrastructure supported by governments across the world, a distinct shift in the balance of power has occurred – away from the provider and towards the consumer.
The birth of "on demand"
A rise in online resources (such as torrents, streaming sites and newsgroups) and mainstream entertainment providers has facilitated this shift to viewing TV "on demand". In the UK, the first mainstream entertainment providers were Sky and Virgin; their comprehensive electronic program guides (EPGs) led consumers to embrace a new-found ability to select what they wanted to watch, whenever and wherever they pleased. With this shift of power away from the provider and towards the consumer, the major providers began to adjust their business models accordingly and looked to other methods of guaranteeing high viewing numbers.
This adjustment has largely involved a move to incorporate a greater online presence. Major broadcasters now offer web-based platforms allowing on demand viewing for internet-connected consumers. An ability to catch up for free on missed TV programs on televisions, laptops, computers, mobile phones and tablets is now the accepted norm in the majority of developed markets.
In parallel to this, some of the most important areas of growth and development during this period were introduced by the hardware manufacturers themselves. The launch of seventh-generation, internet-enabled consoles from Sony and Microsoft (the PS3 and XBOX 360) represented the birth of direct-to-TV streaming, as the platforms sought to go beyond the image of "toys" to become "entertainment consoles". The seven-year evolution of this technology has left consumers with Connected TVs that feature pre-installed broadcaster and third-party streaming software, as well as integrated web browsers, which are now available for less than the cost of an iPhone. Indeed, our latest global forecasts reveal that Smart TV sales – with regards to liquid crystal display (LCD) models – are set to reach 70.2 million units in 2013, a year-on-year increase of 47% compared to 2012. Undoubtedly, the easy-to-use interfaces that allow the average consumer to stream on demand content direct to their TV set through their home broadband connection are driving this popularity.
Control in the hands of the consumer
The upside to the pace of this development is that consumers effectively now have control over content – what they watch, when and where they watch, and how they watch.
However, the potential consequences of this for commercial broadcasters and content owners are significant, particularly in the realms of advertiser reach and engagement. For consumers catching up on their favorite TV shows, it is all too easy to fast-forward through ad breaks, negating the impact of the ad impressions. This behavioral slide towards time-shifted viewing is starting to leave broadcasters with a growing revenue hole and a persistent headache. Direct streaming services like video-sharing website YouTube have sought to counteract this, with the latest "choose your advert" model, allowing users to select either a feature-length pre-roll or two shorter "ad breaks" in longer content.
Taking the UK as an example, only 10% of viewing is currently time-shifted. While, therefore, this doesn’t represent a huge threat to traditional advertising models at present, the rapid increase in content and cross-platform expansion suggests that this is a figure is likely to grow.
Retaining the 'appointment to view'
To counteract this, TV broadcasters have taken steps to retain the "appointment to view" nature of their heavyweight content, that is ensuring that viewers watch TV-scheduled content. Live sport remains a huge draw for all broadcasters as the nature of big events draw in a guaranteed live viewing audience. Live reality shows are also used by broadcasters to retain "appointment to view". Popular live talent shows battle in the primetime ratings wars, often featuring live phone-in votes to help drive live engagement and interaction with the content. The rise of live, "play-along" content has also been prominent, with the likes of international game show franchise "Who Wants to be a Millionaire" utilizing smartphone and tablet platforms to drive second-screen interaction among those watching the live show.
Such innovations have been largely well received and considered something of a success in sustaining viewers’ interest in live content. However, it is worth noting that the presence of a second-screen platform doesn’t necessarily translate to engagement with the TV content. Twitter recently published a white paper on how the microblogging platform is able to drive “discovery and engagement with TV”. While the paper makes some valid points about the link between social buzz and TV viewing, the levels of content engagement appear to vary significantly with the type of programming. While live entertainment programming continues to generate viewer engagement with both content and social media throughout, we see a markedly different response to serious programming (such as US drama "Homeland") which tends to receive large volumes of buzz both before and after. Here, it is the draw generated by this buzz around the content that is the pull for the masses tuning in – as opposed to the time-sensitive nature of live reality and entertainment shows.
So what can we expect in the future? While the format of live events and heavily-promoted entertainment content remains successful at driving consumers’ "appointment to view", we are likely to witness a steady decrease in overall live viewing audiences. The migration towards on-demand viewing suggests that content owners must innovate ahead of the curve to develop their content and retain the live audience.