A Sneaking Feeling About the State of TV

Posted by Sean Carton | November 25, 2014 | 2:56pm

Do you ever get one of those feelings that things aren’t quite what they seem? Sure, everything around you looks normal and you haven’t received any information to the contrary. Yet still that nagging feeling remains. You just can’t shake that feeling that the emperor may not be fully dressed. It’s enough to drive you nuts.

That’s exactly the way that I’ve felt over the past couple of years about television. Everything I’ve read said that consumer TV viewing hadn’t decreased over the past five years or so, except for some slight declines among people between the ages of 18-24. In fact, as evidenced by this chart TV viewing actually seemed to be going up among those over 50.

Viva TV! Case closed, right?

And yet…I don’t know. I just couldn’t put my finger on it, but it seemed to me that fewer and fewer of the conversations I’ve had over the past 5 years or so had anything to do with traditional TV in the way they did before the Internet came along. But this didn’t surprise me: most everyone I knew had either “cut the cord” and ditched their cable subscriptions or were spending more and more time getting their video entertainment via services like Hulu, Netflix and Amazon. Every kid I spoke to (including my own) gave me a weird look every time I brought up the idea of watching TV in “real time.” In conversations going on in the media it seemed to me that the idea of “binge watching” had become the new normal when it came to new TV series. Things definitely seem to have changed. Big time.

But while my gut was telling me that the whole traditional idea of “TV” as a medium we consumed in a pre-scheduled manner while gazing at a screen from our couches was going the way of the “landline” (remember those?), TV ad spending continues to barrel along at a brisk clip, rising higher and higher every year. In the ad biz, TV hasn’t lost any of its allure for creatives and coverage of TV advertising hasn’t really seemed to slack off in the industry rags. While the advertising industry is certainly consumed by digital these days, it’s hard to deny that for most of us in the business, our hearts still secretly beat to the rhythm of Mad Men.

So why have I felt so uneasy? I think a big part of my angst has been that with the rise of the Digital Age over the past decade, the TV industry has seemed more and more like a naked emperor parading around brazenly in front of its ad industry subjects. Everyone knew that digital had changed everything, but we all just kept inhabiting our consensus reality and kept nodding our assent when new numbers came out that said that things were the same as—if not better than—ever. And yet if I looked around I couldn’t help but see more people watching “TV” on mobile devices, “programming” their own entertainment via YouTube, timeshifting their favorite shows with their DVRs and turning to Video on Demand (VoD) services first for their entertainment needs.

These changes made a lot of sense to me. After all, the amount of TV advertising we had to endure on average had increased to a full hour per day as both broadcast and cable networks continued to jam increasing amounts of advertising down our throats. Consumers have responded by timeshifting their viewing in increasing numbers in order to skip commercials and turned to OTT (“Over the Top”) video services (e.g. Netflix) because of the convenience of being able to watch TV when and where they wanted to.  

Consumers just aren’t paying attention to anything for any length of time anymore and they certainly aren’t paying attention to your ads.

Most damning, however, were the numbers coming out from Nielsen indicating that a majority of viewers (some studies say as high as 4 out of every 5) who were watching TV were doing so with another device—laptop, tablet, or smartphone—in their hands and were using them to zone out when commercials (or boring stuff) came on. If you’re an advertiser who relies on TV, this should terrify you. Consumers just aren’t paying attention to anything for any length of time anymore and they certainly aren’t paying attention to your ads.

Attention, it turns out, has become our most precious resource…and it’s a lot more precious than you might think.

In a working paper published by the Harvard Business Review, marketing professor Thales S. Teixeria has finally been able to put his finger on the value of consumer attention. It’s a revelation.

Here’s why: while the cost of television advertising has been steadily on the rise since the Television Bureau of Advertising started keeping records in 1965, according to Teixeria the attention that consumers have been paying to those ads has been steadily decreasing. Examining a number of studies tracking consumer attention since around 1990, Teixeria has found that “the percentage of ads considered fully viewed and getting high attention” has decreased from 97% in the early 90’s to less than 20% today.

To put it even more bluntly, you’re wasting more than 80% of the money you spend on TV spots.

Let me put that another way: in 1990 you could count on 97% of TV viewers watching your commercial to actually pay attention to it. Today, more than 80% don’t. To put it even more bluntly, you’re wasting more than 80% of the money you spend on TV spots.

When you look at the numbers, it becomes even more horrifying. In 1989, a thirty-second spot shown during Prime Time on network TV cost an average of $109,400 or $8.37 per thousand viewers. Adjusted for inflation, that thirty seconds would cost around $190,152 in 2013 or $15.47 per thousand viewers. Inflation sucks, huh?

But things weren’t all bad for advertisers. In fact, they were pretty good. As Teixeria pointed out, 97% of that audience was paying attention to those expensive Prime Time ads, meaning that only about 46 cents (adjusted for inflation) of the ad spend was wasted, increasing the effective CPM cost to only about $15.93 in order to truly reach 1,000 viewers who were actually paying attention.

Now let’s look at 2012. Adjusted for inflation, a thirty-second network primetime spot cost about $106,439, actually $84,000 cheaper than the 1989 spot. But the TV audience had increased over the years, so in order to compensate we’d have to adjust the CPM cost to $24.44…an increase of almost $9 more to reach 1,000 people than in 1989.

But it gets worse (sorry). Remember that Teixeria found that less than 20% of the audience in 2012 was paying attention to commercials on TV. If we factor that depressing figure in we find that rather than the 50 cents or so wasted on an inattentive audience in 1989, we’re now wasting a whopping $19.55 per thousand viewers due to distractions, raising the effective CPM cost (the cost to actually reach 1,000 viewers who are paying attention) to $43.99…276% more than in 1989!

From an advertising perspective, this is the real story about TV today: it’s a rip off.

From an advertising perspective, this is the real story about TV today: it’s a rip off.

In order to reach a mass audience during prime time, you now have to spend approximately $44 per thousand viewers who are paying attention vs. the approximately $16 you’d have to spend to reach the same number of folks a little over a decade ago. Compare this to an average CPM of $2.80 for online display ads, a $5.00 CPM for email ads and approximately $3.00 per thousand for video ads and then TV starts to look pretty darn expensive.

But aren’t TV ads more effective? Perhaps: many seem to think so, even in the face of mounting evidence to the contrary. But even if you do think that TV ads are more effective, you need to ask yourself this: is the effectiveness going to be worth the $40-plus premium you’re going to pay to reach your audience?  In a time when most marketers are coming under increasing pressure to prove ROI, that’s a pretty big number to justify.

Maybe the time has finally come to declare that, at least as far as TV is concerned, we’ve finally gotten our hands on the proof that the emperor truly is running around buck naked.