TV and the Bercow effect; and here comes Apple’s streaming service…
From the changing types of advertiser using it, to the new competition threatening its existence, Dominic Mills charts the evolution of commercial television
Unlikely as it may sound, the bumptious John Bercow has apparently become a minor TV celebrity for Europeans struggling to get their heads round the Brexit-induced contortions of Parliamentary procedure.
Of course he has. TV is the shiniest mirror any society can hold up to itself or by which we can judge others. As with the programmes, so TV advertising also holds up a mirror, both to society itself and the way it plays out through underlying shifts in the economy.
Thus, if you wanted to give aliens a crash course in understanding Britain, just sit them down in front of TV — programmes and ads — for 48 hours. In brutal terms, we’re a nation that likes to shop without leaving the home, we’re hooked on home-delivered take-away food, we like to gamble (also without leaving the home), and judging by the 1% increase in spend on cosmetics and personal care goods, we like to primp and preen.
This much is evident from the latest Thinkbox figures on total TV spend and its constituent parts.
Study the trends over time and you will see how different categories — new ones too — have waxed and waned in line with the broader economy.
Starting at the very top, 2018’s flat revenue figures — £5.1bn — clearly show the early impact of Brexit caution, as some categories of advertiser pull in their horns.
But not all. Online businesses, DTCs or whatever we like to call the likes of Google, Amazon, Expedia, Deliveroo and so on, now comprise the largest single category, with spend up 7% over 2017. Given the dynamics of these businesses — low barriers to entry, the need to build reach as fast as possible and plenty of VC or PE cash with which to do it — this is only likely to continue.
But it wasn’t all that long ago that TV was dominated by packaged goods advertisers, manufacturers of household staples like Persil, Kellogg’s, Coca-Cola, or Nescafe. No more. Food spend is down 3%, and if a ban on HFSS product ads pre-watershed becomes a reality, then it will fall even further, if not in absolute terms then as a share of the whole. Time was, a new Coke ad — and there were several every year — used to be a big deal, guaranteed to reach 90%-plus of the population. Now we don’t even notice their absence.
However, what the economy gives, it can also take away.
Thinkbox doesn’t break it out, but we can also see the the direct-to-consumer (DTC) effect with our own eyes in the decline in retailer advertising, not to mention the disappearance of well-known High Street names from our screens. The big four supermarkets — Tesco, Asda, Sainsbury’s, Morrisons — have cut back, and only partially been replaced by the Germans. Similarly in the general retailer category, down 6%, the likes of Next have all but gone from TV. Supermarkets apart, there’s no likely return to TV for retailers.
[advert position=”left”]
And then we have gambling. Five or ten years ago, gambling was a grubby activity. Now it is everywhere, and ubiquitous on our screens too. But societal pressure is building against gambling, and it may too go the way of other categories — like payday loans, for example.
For anyone who has studied TV advertising over time, this sort of coming and going is the norm. What, it seems to me, isn’t are two related shifts, both of which should benefit it over time. The first is the ongoing relative decline in TV prices, which Thinkbox calculates as 21% lower in real terms than a decade ago — although not for adult audiences under 34. The second, when it becomes mainstream (come on ITV, get on with it) is addressable. While we know it is more expensive, addressable creates opportunities for the long tail.
The balance of these two effects may be what accounts for the Thinkbox figure that I find most interesting: that 2018 saw nearly 900 advertisers new or returning to TV.
And this is perhaps one of the biggest changes in the TV landscape. It was probably only 15 or so years ago that TV was a closed shop, restricted by cost (and almost guaranteed price inflation) to only those advertisers with the biggest wallets. But its gradual democratisation is a ray of light in an otherwise fluctuating landscape, the biggest challenge of which is the rise of SVOD.
Talking of which…
And it’s Apple vs Amazon, Netflix et al
iNuts (or whatever the collective noun for Apple enthusiasts is) and TV obsessives may care to set aside some time at about 6pm today (25 March).
Then, if they are so minded, they can tune in to CNET or the Apple website to watch the latest big Apple announcement, widely expected to focus on the launch of its long-waited streaming service.
FFS, some will say. That’s all we need: another bloody VOD (or SVOD) service, as if the choice currently available – and that’s even before BritBox, Disney (due to role out next month) et al – isn’t tyranny enough.
Apple’s big advantage, the billions of budget it can wield apart, is that it starts with a huge installed user base, thanks to roughly 1.3 – 5bn devices currently in use. Its big disadvantage is that it is several years behind its competitors.
The latter may turn out to be irrelevant, judging by the Hollywood talent it has managed to attract — Reece Witherspoon, Jennifer Aniston, Oprah Winfrey, and directors like JJ Adams (Star Wars) — even if we don’t know yet what the content will be.
It’s stating the obvious to say that, in the end and all hype put to one side, success will be determined by the quality, breadth and differentiation of its content. That will determine speed of take-up and consumer willingness to pay.
Culturally, Apple consumers are attuned to paying a premium for its products, but that is because they are (or are perceived to be) demonstrably better.
Content is altogether different. It’s much harder to judge and money doesn’t necessarily buy success — just look at the numbers of Hollywood blockbuster disasters. And we don’t know yet how or how much Apple TV will charge. It could be a simple monthly fee, other some kind of discount or incentive to existing users.
There are suggestions that Apple may bundle subs with providers like HBO and Showtime, but they’ll be wary of letting the cuckoo into the nest the same way film studios did with Netflix. Some suggestions are that, instead of being the primary content provider, Apple will act as the link in buying streaming bundles. If this is true, then in the increasingly complex TV world, it is both a business model innovation and chimes with one of Apple’s key values — making life easier for its users.
Alternatively, it could just buy its own Hollywood studio.
Either way though it heaps more pressure on the legacy broadcasters, not just in the salami slicing away of audiences and the consequential impact on advertisers, but also in the price of creating original content and buying in the talent.