The release last week of Veronis Suhler Stevenson’s annual Communications Industry Forecast & Report is always a big event in advertising, media and Wall Street circles (TelevisionWeek, Aug. 2). But the 2004 edition reveals data about the eroding relevance of ad-supported media that should give pause to advertisers, agencies and media companies alike.
The VSS report, which is chock-full of valuable statistics on media usage, revenues and market shares, also is likely to give media planners new impetus for developing ways of targeting consumers other than what they’ve been doing with traditional media options.
During 2003, the most current full-year data contained in the report, a key milestone occurred from a Madison Avenue perspective. For the first time ever, consumers spent more money accessing media content directly than advertisers did on ad-supported media content that was planned to reach them.
The difference is still relatively small. U.S. consumers spent $178.4 billion to directly access media content, versus $175.8 billion spent by advertisers on media-related advertising. But it is a highly symbolic tipping point for the ad industry, because it indicates that the fundamental economic model for the U.S. media industry has shifted from Madison Avenue to consumers themselves. While that trend has been developing for some time and should come as no surprise to anyone who has been tracking media spending pattern reports like VSS’s, it could come as a wake-up call for many in the industry.
In fact, it is just those shifting patterns that have been leading the major media agencies to begin moving from traditional media planning to a broader approach to communications planning. The recent decision by Procter & Gamble to embrace that change and consolidate its communication planning account at Starcom MediaVest Group and Carat is symptomatic of the changes that have already taken place among consumers themselves. They simply are no longer as reliant on ad-supported media. They’re paying to get their media content directly and often without any significant advertising content in it, and as another even more frightening statistic in the VSS report indicates, they are spending a lot less time with ad-supported media.
And while that statistic has not yet reached its tipping point, it is approaching it. In 1998 media with “significant advertising support,” such as broadcast TV, radio, newspapers and magazines, accounted for nearly two-thirds (63.6 percent) of the time U.S. consumers spent with media. By 2003 that share had fallen to 56.4 percent, and it is projected that by 2008 it will be only 54.1 percent.
Over the next five years, the report projects, time spent with ad-supported media will grow as new ad-supported media options continue to proliferate and as marketers and agencies grow more ingenious about how to get in front of consumers. The problem is it will only grow by 6.3 percent. Over that same period, the amount of time consumers spend with media “supported predominantly by consumers”-things like subscription TV services, cinema, home video, recorded music, video games and Internet access-will grow by 16.7 percent. If those rates continue, ad-supported media could become a minority of the amount of time people spend with media sometime in the next decade.
The trends don’t suggest that advertising is poised to disappear anytime soon. If anything, ad-supported options are expected to continue to grow. But that expansion will fuel fragmentation and clutter at a time when consumers seem destined to take control of their own media choices and apparently are willing to pay for that privilege.
In other words, the trends seem to suggest that ad-supported and consumer-supported media will continue to co-exist, though consumer-supported media will begin to crowd out some of the time people spend with media. While that might not seem like a terrible development for Madison Avenue, it’s the reason behind the simultaneous growth of the two economic models that planners-whether they are traditional media planners or communications planners-need to understand and ultimately contend with.
“Over the past 25 years consumers have increased their time spent with media substantially due to the presence of new electronic and digital media choices, such as cable and satellite television, home video, video games, the Internet and satellite radio,” notes VSS. It adds an important observation: “Consumers have become more sophisticated in their media usage and, therefore, media multitasking (using two or more media simultaneously).”
And that may be the most challenging part of all for the ad industry as marketers and agencies are forced to contend with a potentially bigger issue than advertising avoidance. And that is advertising attentiveness. Madison Avenue already understands this, of course, and that is why it has been stepping up the communications planning game, conducting new, original research to understand not only which media reach their consumer targets but when and where they will be most attentive. The challenge will be to assess how to do that while consumers are devoting increasing attention to non-ad-supported media or across several media options at the same time.
The news is somewhat better for some ad-supported media, especially television. “Consumers continue to spend the most time with television, especially as they continued to increase cable and satellite television viewing,” the report finds. “Total time spent with television, including broadcast and cable and satellite, increased 2.4 percent to 1,745 hours of viewing per person [in 2003].”
In fact, VSS predicts that the number of hours U.S. consumers spend with TV will actually grow 2.0 percent per year over the next five years, about the same rate (2.1 percent) as the overall increase in time spent with all media. Of course, not all of that increased usage will represent genuine advertising opportunities, since consumers will begin to adopt more video-on-demand and digital video recorders, two TV options that are expected to significantly decrease the amount of advertising that people watch on TV.
That’s still a better scenario than the one facing some other ad-supported media, such as print, which will actually see the amount of time consumers spend with them declining over the next five years. VSS projects time spent with consumer magazines will decline 2.0 percent and time spent with daily newspapers will decline 0.9 percent per year through 2008.