The FT Digital Media and Broadcasting Conference, which took place during 9–10 March 2009 in London, highlighted the strength and resilience of TV as a form of entertainment despite the turmoil in TV advertising markets. Indeed, having participated in a panel discussion at the event, I concluded that predictions of the industry’s demise as a result of the growth of online video services are wildly inaccurate.
Commercial broadcasters around the world are suffering – for example, reports suggest that advertising revenue declined by 8.8% in the second half of 20081 – while online advertising continues to grow. However, although online video consumption is increasing dramatically (users are now counted in the tens and hundreds of millions and the number of video streams viewed via PCs per month is counted in the tens of billions), this trend must be viewed in perspective. In the US, for example, the average user spends less than 15 minutes per day watching online video, but TV consumption has reached an all-time-high of more than 5 hours a day. Another metric highlights the disparity between the two markets even more: in 2007, TV industry revenue in the UK amounted to GBP11.2 billion, compared to an estimated GBP34.5 million for online video.
The number of online video users may have increased rapidly, but monetising these users continues to be a crucial issue. Advertising, rather than subscriptions, is likely to be the dominant source of revenue because consumers expect most Internet content to be free. The Internet offers the promise of more-targeted advertising, which should deliver greater value than traditional advertising. However, online advertising continues to be at a relatively experimental stage, and business models still need to be optimised.
In spite of the well-publicised difficulties among some commercial broadcasters, the TV industry as whole should take comfort from market research that indicates that consumers spend more time focused on the TV than they do on online video consumed on the PC. Nevertheless, the TV industry should not disregard its upstart online video sibling. Consumers do want to watch video at the time they want, and the rapid growth of downloads through the BBC iPlayer on Virgin Media’s cable platform in the UK gives some indication of the potential value of a truly interactive TV experience. Moreover, as interactive video consumption on mobile devices becomes increasingly viable, advertisers such as Tribal DDB Worldwide are right to note that these platforms and their associated content aggregators (for example, Apple and Nokia’s application stores) represent major opportunities to reach audiences in new environments with relevant messages.
Broadcasters and other content owners and aggregators in the TV industry are still unable to unlock the full value of online audiences, but developments in interactive TV and video services in the mobile industry suggest that success may be closer than many think.
1 ITV plc (London, UK, 2009), ITV plc Report and accounts 2008. Available at http://www.itvplc.com/investors/reports/.
Analysys Mason will cover some of the issues concerning online video and content monetisation in forthcoming reports as part of its Consumer Content and Applications research programme.