CBS Chief Research Officer Dave Poltrack Monday outlined a future for broadcasting that could very well afftect cable, local TV stations and advertising, and thus have a significant impact upon the multibillion-dollar TV industry.
As a researcher extraordinaire, Poltrack’s the kind of guy Joe Friday of "Dragnet" fame would have loved. He’s strictly a "just the facts, ma’am," gatherer of information who then synthesizes that information into what he believes is a very probable scenario of where that information is leading us.
In a nutshell, here’s the information–and the conclusions the information may lead to–as presented by Poltack to reporters at the summer press tour of the Television Critic’s Association in Pasadena, Calif.:
While the number of homes with digital video recorders (DVRs) may be hitting a wall, it’s clear that more and more people are watching video over the Internet via a broadband connection.
Furthermore, the number of people that watch TV while they use their computer is growing as well.
Also, by the time the Christmas holiday season is here in 2010, there should be a fair number of TV sets available from a number of different manufacturers that have Internet access built-in.
Now, as in any serious discussion about business, this is all about following the money.
Currently, the most significant monies made by the broadcast networks are from ad revenues. The highest value the broadcasters get is for ads that are seen live on the network shows. Next in line in ad value are the ads that are seen when a viewer watches a show that’s been recorded on a DVR. Based on a compromise fornula worked out between advertisers and their media agencies and the networks, the networks don’t get paid for any viewing that occurs after three days.
Third in the line-up of ad value are ads the broadcast networks show that accompany programs that are streamed online. While the networks usually get a higher cost-per-thousand for these ads compared to ads that air with a show when it is originally broadcast, there are usually a significantly fewer number of ads per program carried online.
Poltrack has studied viewing habits, along with viewing trends and where technology appears to be headed. He said that DVRs are basically a transitional, interim technology, and where we are really heading is significant viewing of programs over the Internet, but not necessarily on one’s computer. Instead, your favorite TV shows will be seen over the Internet on your big-screen TV that is equipped with Internet access.
Given that the ads can then be truly interactive and targeted, they would most likely be worth a significant premium to marketers. Thus their ad value would certainly surpass the ad value of spots seen on DVRs today, and, given enough of them, they might even equal and then exceed the value of spots seen on TV today.
Furthermore, Poltrack posits that the broadcast networks might then tear a page out of the playbook of Time Warner chief Jeff Bewkes. Bewkes has garnered wide attention for an idea he calls TV Everywhere. Under that plan, cable subscribers, once their subscribership has been authenticated, would be able to access cable shows online as well as on their TV sets.
Poltrack suggested that the broadcast networks come up with a similar plan. Under this scenario, a user’s high-speed Internet provider–be it Time Warner Cable’s Roadrunner or a telco supplier or other provider–would pay a fee for any of their users who want to access broadcast network progamming online.
And the shows could be accessed by users for free, with commercials, or with an additional fee (this time paid directly by the user) on a service like iTunes for a version of the shows with no commercials.
This could be a Holy Grail scenario for the broadcast networks: they get the dual revenue stream they didn’t get when cable started (though now some networks do have retrans deals, not all of them are for cash).
To review: the broadcast networks could get paid by high-speed Internet providers for showing their programs for free over the ‘net, with commercials. And because the commercials can be targeted and made interactive, the broadcast networks would be able to charge a premium for the commercial time. And the marketers would pay the premium with only minimal complaining because they would be able to get a much more measurable return on investment on their spots than they do now.
Or do they? One of the key question marks in such a scenario is the role of the local broadcaster. Variety TV Editor Mike Schneider asked Poltrack about that during the presentation, and Poltrack replied, in essense, that the station business is certainly important to CBS and the networks and that all the details would have to be worked out.
Which is true enough. In the past the stations have been huge profit centers for the networks. And the drivers of these profits have historically been local news operations.
But the station business has become tougher and tougher, especially during this recession. We have heard some network–and yes, even TV stations executives–quietly wonder about this scenario: If you live in a city that has a major 24-hour LOCAL all news TV outlet, such as Time Warner Cable subscribers have in New York City with NY 1, and Cablevision subscribers have in Long Island with News 12, to name just two, would a lot of folks really care if one or two of the local TV stations in that DMA disappeared tomorrow?
The point here is that with the technological changes and viewing habits people like Poltrack say are coming, local stations need to make sure they remain relevant and essential to their viewers.
Needless to say, Poltrack’s presentation has given those who work in just about any segment of the TV industry a lot to think about.