The emergence of Netflix and other streaming services that offer subscribers a commercial-free TV viewing experience means a generation could grow up without ever knowing the meaning of the phrase: “We’ll be right back after a word from our sponsor.”
The broadcast and cable networks that took in $19.7 billion in revenue for advanced sales of commercial time last year don’t want to see that happen. That’s why Fox and NBC plan to reduce the amount of commercial time in their shows starting next fall. Both are looking to offer advertisers the chance to run commercials in shorter breaks where they will hopefully find a more attentive audience. Other media companies have launched similar initiatives to slash the number of commercials on their cable channels.
But doing so comes with a risk. Airing fewer commercials could mean less revenue for the networks — unless they can convince advertisers that it’s worth it to pay more to have their spots running in a less cluttered program. The topic is being debated ahead of the upfront market, where most of the advance ad time for the 2018-19 TV season is sold.
The networks need a new selling strategy as their TV ratings continue to decline. The prime-time audience of the broadcast networks is off nearly 20% compared with the previous year and many of the major entertainment cable networks have experienced double-digit declines as video content gets consumed to a greater degree on digital platforms.
Airing fewer commercials could help reverse that trend, and advertisers would welcome a less crowded environment for their messages.
“I absolutely think a shorter commercial pod is better for the advertiser,” said David Campanelli, senior vice president and managing director of video investment for the ad-buying firm Horizon Media. “How much better will it be versus how much more they charge for it? That’s a big outstanding question.”
Networks have reconfigured their commercial breaks to deal with changing technology before.
Once remote controls were used in a vast majority of homes by the early 1990s, the networks eliminated the breaks between programs because they found that was when viewers most often flipped channels.
When digital videorecorders started reaching critical mass in 2008 and cut into prime-time viewing, Fox, with great fanfare, reduced the number of spots in several of its new series as a way to encourage viewers to sample them.
Still, those changes occurred when broadcast and cable remained the only places for viewers to go for original programming. That’s no longer the case, with the explosion of new programming across multiple platforms. Streaming video is the greatest challenge yet to ad-supported television — and it’s not just from Netflix.
Millions of people are watching their favorite hit network shows such as NBC’s “This Is Us” on a streaming device or through a video-on-demand service within the week after they air for the first time on television.
Those viewers watching on a delayed basis are seeing commercials too, just fewer of them, and it’s conditioning them to expect fewer.
Broadcast networks’ hourlong prime-time shows carried an average of 11 minutes and 32 seconds of national ads in the fourth quarter of 2017, about the same amount as four years earlier, according to data from media strategy firm Magna Global. Clutter is seen as a larger problem on cable networks, some of which carry as much as 18 minutes of national advertising per hour. That has led Turner, Viacom and A+E to announce they are cutting the ad load on some channels by as much as 50%.
Digital and on-demand platforms that air network shows carry a smaller load of commercials. The most recent episode of NBC’s “This Is Us” available on Hulu carries around seven minutes of ads.
The networks are seeing increased revenue from digital advertising on their shows. But their linear TV channels still command higher ad prices because they can potentially reach nearly every home in the country and have a long legacy of effectiveness. It’s why advertisers still turn to them despite the audience declines.
Nonetheless, television’s historical advantage is being threatened by millennials who have adapted more quickly to watching on digital devices than older viewers. Their expectation of seeing a lighter commercial load on their favorite shows has some networks feeling pressure to take a similar approach on conventional or linear TV.
“Obviously part of it is people are choosing to watch on their own schedule,” said Mark Marshall, executive vice president for entertainment advertising sales at NBCUniversal. “But the other part of it is that it’s just a better environment with a lighter ad load. We had to be honest with ourselves and say, ‘Knowing that, how do we figure out a way to make TV more like digital?’”
NBCUniversal is reducing ad time by 10% in original prime-time programs across NBC and its cable networks that include USA, SyFy and Bravo.
Along with that overall cutback, the company will offer advertisers one-minute commercial breaks. Spots that run in those smaller breaks will be priced at a premium because they can be more effective in marketing a product.
“We’re talking about something that has never been done before,” Marshall said. “You’ll be able to see one or two spots in the first 24 minutes of ‘This Is Us,’ the No. 1 drama on TV.”
Fox Networks Group, which includes the Fox network and the cable networks FX and Fox Sports, has an aggressive long-term plan in the works, aiming to get its commercial load down to two minutes per hour by 2020.
The network recently gave advertisers and viewers a taste of what the format would look like in a March 18 episode of “Family Guy.” It ran uninterrupted, with just two one-minute spots from Sony PlayStation airing before and after the episode.
Fox is also approaching clients with a variety of commercial formats as an alternative to the traditional 30-second spot. The network showed six-second ads during NFL telecasts, where fans have bemoaned frequent commercial breaks. During the World Series, Fox ran spots in an on-screen box while keeping a live image of the event on screen, a technique that has been used for years in auto racing and soccer.
Ed Davis, chief product officer for Fox Networks Group, said failing to address the issue of advertising clutter in the face of digital competition risks having some viewers fall out of the TV habit completely.
“If we don’t create a sustainable model for quality storytelling there are portions of the audience that become unavailable for marketing,” Davis said.
Donna Speciale, president of advertising sales for Turner, welcomes the efforts by her competitors to reduce advertising clutter, which her company has pursued since 2015.
Turner has cut the commercial load in its reality-based comedy network TruTV by 50% last year. TruTV was one of the few entertainment cable networks to not experience a year-to-year decline in ratings among its target audience of 18- to 49-year-olds. Turner has also cut ad time by 30% in original series that run on TNT.
The pitch to advertisers who buy time on the channels is that they are getting more effect for the money they spend.
“We are charging more but the client is getting more value for it,” Speciale said. “When clients and brands do this, they are paying a little more than they would in a traditional pod, but they are getting a four-times lift in sales.”
Speciale declined to specify how much of an increase TruTV has seen in its ad rates since it reduced the number of commercials but said, “It’s working for us.”
Ad buyers are carefully weighing the benefits of the new approaches before paying higher rates.
Shari Cohen, executive director of media investments for Mindshare, noted that prices did not go down when networks added commercial time over the years.
“I give the networks credit for trying to evolve and be innovative,” Cohen said. “I don’t know if it should come with incremental costs.”