Falling TV audiences aren’t the problem, fixed inventory is

Paul WilkinsonAs television audiences decline Carat’s Paul Wilkinson asks if the problem is not so much falling audiences but rather the inventory model upon which free-to-air television is bought.  

Ok, let’s not beat about the bush, let’s rip off the plaster and talk honestly for a moment; TV viewing is down.

There you go. I said it. Somehow I feel better for saying it. Phew!

2014 full year consolidated average viewing for Australia’s commercial TV networks in metro areas (inclusive of SBS & STV) show a 4% drop in overall viewing against Total People*, 7.4 per cent for people aged 25-49* and a whopping 14 per cent for people aged 13-24* as compared with 2011.

In fact the only age range maintaining average viewers appears to be those aged 50+ however given the number of People 50+ in Australia has increased by 489,000 since 2011** this suggests that the average monthly reach provided by TV in the last 4 years has fallen by 8.7 per cent (or 1.3 percent pts).

So what’s going on?

Well, rocket science, it is not: the rise and rise of online video viewing is taking its toll.

It’s hardly surprising really, given that Catch Up TV sites in Australia have quadrupled in popularity in the last 3 years*** and with the advent of streaming services such as Stan, Presto & US giant Netflix hitting the online waves, the impact on traditional TV is sure to increase further still.

Already we hear reports that over 200,000 Australian’s are circumventing cyber borders and accessing US Netflix content ‘through the backdoor’ via VPN’s and that’s based on an Australian marketing budget of exactly $0.

What this actually suggests is not that people are watching less content – they are actually watching the same amount, it’s simply that their viewing behaviour is changing.

They are moving away from the TV set and watching content elsewhere.

Again, this is not new news.

In contrast, appetite amongst advertisers for the good ol’ fashioned telly box appears un-phased.

SMI data for 2014 shows that, excluding SEM, 49.8 per cent of overall advertising dollars went into TV – largely unchanged since 2007 when it sat at 49.9 per cent.

And why is that? Well it’s quite simple – like it or loathe it: TV works.

But TV’s effectiveness was never in doubt.

The problem, as I see it, is the fixed inventory model by which we trade our FTA airtime, which is ultimately responsible for ongoing, industry wide, campaign shortfalls.

Let me explain my point: at this stage we buy a spot, at a fixed rate, in the hope that we will reach the audience we are targeting. If a programme fails to perform, more often than not, there is no airtime availability to fill the audience gap left.

And yes, it’s completely fair to say that should the reverse be true, and a programme out performs expectation, we do not pay back those over deliveries.

But the issue there is we can’t, because we can’t cancel spots out of the month, because cancelling spots means cancelling money.

What we need, dare I say it, is to move to a fluid, demand and supply trading model.

We need a model whereby we truly buy an audience, not a spot.

A model where we work to a CPM based on a specified target audience in much the same way we already buy online content.

Meaning, if a programme over delivers it’s expected audience, it is ‘worth’ more and we are able remove activity accordingly in order to remain within our budgetary confines.

Conversely, if it under performs it is ‘worth’ less and we are able to add activity to make up for shortfalls, and maintain both our audience targets & committed budgets.

This suggestion is not without its barriers: it means overhauling our entire free-to-air trading model, re-educating our buyers, re-educating our sales teams and re-building our tracking and buying systems.

MCN are already tackling this: beginning in March they are moving to such a trading model.

But until this is addressed with the free-to-air networks where the bulk of our spend sits, I foresee that the issues of delivery will continue to increase as audiences decline.

And as shortfalls increase, so will advertisers need and desire to move money into alternative media.

But by then, it may well be too late.

Paul Wilkinson is group investment director at Carat

*Oztam Consolidated Data, full year total viewers, all day.
** Oztam data, P50+ Potential 2011 vs 2015
***2014 Experian Report: “Catch Up TV Insights”


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