Delayed Viewing Creating Ad Revenue Opportunities

Once deemed a threat to television advertising, delayed viewing is becoming creating opportunities for broadcast networks to generate revenue as more programs appear on video on demand and the Internet.

“Just about every primetime program is available on video on demand. Nielsen is counting the ratings they get during the C3 commercial window. And fast forward is disabled. VOD is a significantly better situation for us than DVR playback,” said David Poltrack, head of research for CBS, speaking Tuesday at a TV on Wall Street panel sponsored by the NAB in conjunction with NYC Television Week.

Poltrack said VOD usage “exploded” during the first four weeks of the new season. “It’s a real phenomenon this year,” he said.

Delayed viewing now accounts for about a third of all viewing of network programming. And that delayed viewers bring in a younger audience—17 years on average, Poltrack said.
Online viewing is also climbing, up more than 43% for CBS alone, according to Poltrack. Online viewing is a good deal for CBS because the market for quality online video is a seller’s market and virtually always sold out. CBS makes more money per online viewer than it does with viewers who watch on traditional TV, he said.

VOD creates new ad sales opportunities for broadcasters after the three day C3 window as dynamic ad insertion approaches critical mass. “At the end of the three day window, we pull out all the ads, so no more free impressions,” said Poltrack. “It’s going to be an entirely new market.”

Poltrack said that cable operators are moving to roll out dynamic insertion. CBS doing a trial of dynamic ad insertion with Comcast.  "We’re in a beta on this right now," he said. "We know the technology works. We’ve tested Nielsen’s ability to measure it. All the systems seem to be together. Of course we have to make a business deal now."

Wall Street is enthusiastic about the TV business as well, according to analyst Marci Ryvicker, especially in the past 18 months. “The [advertising] pie is growing at 2%, but TV broadcast is taking a bit more share,” she said. She said advertisers were focusing on media that works, “and what we hear is that TV still works.” At the same time, she doesn’t see digital advertising stealing revenue from TV.

Another panelist, Vincent Letang, executive VP of global forecasting at media buyer Magna Global, said that unlike in the past, overall media growth in the U.S. has not moved up as strongly as ad economic growth. Letang chalked up the lag to technology and the price deflation.

Auto sales are up about 16%, Letang added, but auto ad spending isn’t up as much, only about 6%. “It’s still a driver, but not as much as it should be,” he said.

On the other hand, Letang explained that pharmaceuticals have been a surprise, showing growth after four to five years of declines.

Ryvicker adds that she expects the Affordable Care Act to generate $1 billion of advertising spending, with $700 million going to stations.

Greg Pinelo, partner at GMMB, a political media strategist, said most of those ad dollars will be aimed at consumers, rather than political messaging.

“It’s extra dollars coming into the ecosystem,” he says, because many consumers will have healthcare for the first time and “they’re going to have access to drugs, a lot of them for the first time outside of an emergency room context.”

Because of the Citizens United Supreme Court decision, there will be more political money during election cycles, and that money will be spent on more local races, not just national and statewide campaigns, Pinelo said.

Pinelo added that local broadcast will remain an important media for election campaigns, but after the success of President Obama’s re-election campaign in finding non-traditional ways to reach undecided voters, political media buying will likely change. He said the Mitt Romney campaign spent about 40% of its money in local news. “We spent $25%,” he said. “the challenge we face was clutter.”

He said so much money was spent during newscasts in cities in swing states like Ohio that the stations aired less content to make room for political ads. “I feel like I owe the entire city of Cleveland an apology,” Pinelo said.

The Obama campaign used data to find offbeat places to reach persuadable voters, since 40% of theme watched no news of any kind. They found male undecideds on SportsCenter and younger voters on Comedy Central’s Daily Show and Colbert Report, which are news shows to them.

With data getting cheaper and people who worked in the “Obama Media Cave” starting their own businesses, Pinelo expects both parties to use those techniques.

Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.