The Death of Advertising
Traditional advertising is dying, and it can’t happen soon enough.
I’m sitting here watching a TV show that I downloaded off iTunes, and I started thinking about how much this must piss off the network execs. The content provider (i.e., the studio that created the show) gets paid, iTunes gets paid for distribution (albeit a tiny amount), and that’s about it.
There’s no TV network selling ad-time to generate money. There’s no TV network choosing the time slot.
There’s no TV network censoring the content.
...and best of all
There’s no TV network choosing what shows get made because there’s no ratings agency (Nielsen) selecting a “representative sample” of viewers to determine what’s good and what’s bad.
There’s no middlemen!
But wait, you say, there’s still a lot of TV viewers that will watch ads. Yeah, but I think that unless you live in a galaxy far, far away, you will soon be selecting content and downloading it. Or at the very least, you’ll be paying a monthly subscription which means no commercials, just like with cable TV and satellite radio today.
It all comes down to pricing. But first a back-grounder.... Here’s what’s going on in the TV space, for example:
1. Right now TV and radio are free because they are subsidized by ads that are inserted into the programming.
2. Technology has enabled TIVO boxes that digitally record programming. Now you can watch your program whenever you want. And you also won’t miss it, which means that re-broadcasts don’t make sense. These two facts combine to drastically reduce the effectiveness of ad-targeting. How? Well, since you can record the program and watch it at a totally different time, networks no longer know what demographic is sitting in front of the TV between programs. It also means that the number of viewers of the re-broadcasts drops severely. I’ll come back to this recording thing again in a bit.
3. TIVOs can skip over ads. They do this by sensing when the volume or contrast on the screen changes dramatically. Ironic, the very gimmick that the advertisers use to get your attention (louder volume levels) is the thing that enables us to screen them out! Needless to say, this is causing network execs to have nightmares. Strangely, advertisers are not willing to pay the same amount of money for a commercial that very few people will see....
4. Piracy. Yep, it’s there, and it won’t go away with lawsuits. Believe me when I say that pirates will always be one step ahead of the law in terms of technology. So who is hurt most by piracy? Well, certainly the studios. Also, the TIVO companies are hurt because you’re not using their product. Finally with pirated content not only are people not watching original runs of programs (reasons 2 & 3 above), but they are also not watching syndicated re-runs. Again, less advertising dollars.
In the next few years you are going to see network execs fight tooth and nail to prevent #4 using legal means: They tried to sue individual users already, and no one cared. Next they tried to insert false content on the pirate networks. That flopped. Finally, they will try to sue ISPs. When that fails, they will pay ISPs to voluntarily block pirate transmissions. Pure folly, it won’t work.
My guess is that networks will push hard for HDTV to come out, because then they can encode DRM into their programs to prevent illegal distribution. But guess what, every DRM scheme out there has been cracked, so that will flop too. What’s the answer?
Duh, we already have it. It’s the iTunes solution: “Make downloading an easy, quality experience at the correct price and piracy will stop”. Remember, the studios still make their cut, so they are fine with this. It’s the networks that lose out, and to some extent the advertisers (since all downloaded materials will be stripped of commercials).
Now here’s an interesting twist to the argument: Do we really need advertising? Sure, for new products, how else would we find out about them. But for something like Coca-Cola, are you going to stop buying it just because you haven’t seen an ad in a while? Probably not, although ad execs will vehemently argue that point. My point is, I think that there’s a lot of wasted ad dollars out there, and so the digital media revolution is not going to hurt advertisers that much (though it will definitely hurt the ad agencies).
And remember, we’ve still got billboards and stuff. The price of these things should skyrocket in the next few years as that real-estate becomes more in demand.
Wait, what about the web you say? C’mon, who doesn’t have a browser that blocks pop-ups and (sometimes) banners? Cookies? Yes, it’s getting tough to shove unwanted content in front of eyeballs these days (sigh...). And forget the whole “homepage” idea. When was the last time anyone went to Coca-Cola.com? When was the last time someone Googled for “sugary carbonated drink” and wound up at that site? Even the new advertising paradigms of the Internet are falling flat for those types of products.
It’s going to have to come down to product placement. Maybe a chick having a threesome with a dude and a bottle of Coke isn’t as far away as we think.
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Sunday, October 22, 2006
