Blending Traditional & Digital TV Models: An Untapped Opportunity

Digital Television

It’s an obvious statement that most audiences no longer rely solely on broadcast and cable for their content consumption. In fact, Forrester reports that more than 37 million U.S. households today use at least one connected device for viewing digital content. So why is Jeff Zucker’s quote that investing in digital risks “trading analog dollars for digital pennies” still being rehashed? Subscription revenue aside, while the majority of ad spending is still heavily focused on television and cable (23% as opposed to 89%), digital video advertising is growing. Forrester projects that digital video ad spending in the U.S. will surge by more than 250% from $2 billion in 2011 to $5.4 billion by 2016. Content stakeholders shouldn’t feel like they have to trade one medium for the other. Instead of choosing between dollars and pennies (which I’d argue are at dimes now), isn’t it better to have both?

Some audiences are even beginning to rely on online mediums as their primary means for content. The Diffusion Group forecasts that the number of cord cutters, as well as those who have never subscribed to pay-TV, will jump 58%, from 10.9 million in 2012 to 17.2 million U.S. homes in 2017. Last year alone, the mobile video viewing audience grew by an impressive 25.9%, while the TV audience dropped by 1.8%. However, this is not to say that broadcast and cable are going anywhere. One study found that 79% of consumers are watching content through a cable or satellite box, compared with 56% who stream content through a computer, 48% who stream through an internet-connected device, and 29% who watch through a mobile device. Traditional TV and cable will likely always be a popular method of video consumption, and it is television’s content that many users are watching online. However, audiences are also engaging with new forms of content ranging from short-form how-to videos to new digital shows like those funded by Google’s YouTube. Some content serves as a real bridge between old and new media. YouTube’s Recipe Rehab spawned its own Saturday-morning cooking competition on ABC, while Fox’s Arrested Development has been revived with new shows exclusively for Netflix. Instead of playing audience tug-of-war, it seems logical for traditional producers, broadcasters, and programmers to work with IPTV and OTT publishers on new content formats, increasing their audience touch points and the revenue that comes with it.

Audiences want content in all its forms

Traditional and digital television models need to satisfy audiences’ thirst for content in all its forms. Audiences today expect to have access to any type of content they feel like watching, when and how they want to watch it. IPTV devices such as Google TV, Roku and Boxee, and OTT services such as Netflix, Crackle, WSJ Live, have opened audiences to a wider variety of content choices, but these new options shouldn’t necessarily be viewed as competitors to traditional models. The content available through these services isn’t going to replace the desire to watch cable and broadcast favorites like Survivor or Mad Men. Instead, all video stakeholders should view evolving audience behaviors as a call to action to diversify and connect with audiences through more content formats. Food Network, the broadcaster of Chopped, could create short-form shows for amateur cooks on preparing a healthy meal in 5 minutes. Likewise, OTT and IPTV services are able to promote content from recognized producers as a means to keep audiences exploring their library. Webisodes, behind-the-scenes, and exclusive digital content offer publishers the means to engage with audiences in more of the ways they are consuming content. I am not saying that these forms aren’t being experimented with, but more of it should be done given that the distribution and technical capabilities are already in place. Even the producers themselves can now go direct to the consumer, but they should still add incremental viewership by working with publishers.

Overcoming technical limitations

There simply isn’t enough time in the day to deliver the content users want through linear programming models alone. Obviously, there’s not a cable channel that can air every season of 30 Rock on a continuous loop or bloopers and other variations of the show. It’s clear that audiences are well aware of broadcast and cable limitations. By the end of the first quarter of 2012, a total of 65.7 million people worldwide were IPTV subscribers, a 34.5% increase year-over-year. Content available through cable is limited to their provider’s technical infrastructure (ignoring content relationships for the moment). Even though audiences have the choice of requesting a video on demand, they still have to choose from a finite set of programs or movies. Even as the library grows, searching and discovering content is much harder with your traditional set-top box interface and remote. Publishers that build OTT applications for IPTV platforms have more flexibility to offer users greater control over program selection, and the number of channels is only limited by the amount of bandwidth a subscriber has available through his/her provider.

IPTV and OTT offer traditional publishers the means to overcome internal space limitations, but they aren’t being used to their fullest potential. Beyond the broadcast reruns available on OTT services, producers and publishers aren’t tapping into enough opportunities for niche interest content. For example, short 1-minute clips of 30 Rock’s “Kenneth’s Pearls of Wisdom” and Liz Lemon’s childhood flashbacks are available on Hulu, but I can’t find this type of content on Netflix or Amazon, even though there’s probably an audience for it. Broadcast and cable systems haven’t evolved quickly enough to keep up with users’ demand of more varieties of content. Although it may make sense for publishers to limit new content to their cable and broadcast channels, IPTV and OTT offers a unique opportunity to engage audiences with older content and introduce the shows to new audiences through content designed for the OTT medium. Services, such as Netflix, Hulu, and Vudu, are finding opportunity in the gap; traditional publishers should, too. There certainly are advertising dollars waiting on the digital end.

The best of both worlds

The real point in all this is that that there is a significant and untapped opportunity for large cable programmers and broadcasters to create their own niche OTT services to accommodate the interests of their audiences. For instance, networks like the NatGeo can partner with companies to develop device applications that can supplement audiences’ desire for additional content. How many people would take advantage of a “Destination Guides” app on their smartphone or tablet from the NatGeo? The publisher could then make money by either selling the apps or powering them with ads. MLB has been offering its app, At Bat, on a majority of connected devices for quite some time. Free users can watch the free game of the day, while subscribers who pay $14.99 can watch every game for the entire season. And those who subscribe to MLB.TV Premium on cable will also get access to a subscription in this app.  I know big media is working on integrating more innovative content, publishing, advertising and technology companies – with Discovery acquiring Revision3 and Scripps acquiring RealGravity, to name a few – but I’m surprised the industry and all the other constituents aren’t moving faster.

Bringing together the worlds of traditional and digital TV should not be seen as that farfetched, and in fact, can present a significant opportunity for advertisers who have been afraid of unchartered territory that is filled with user generated content and unsafe environments. Instead of killing traditional television, digital video offers traditional producers, publishers, and advertisers an opportunity to create alternative and complementary digital distribution models and the time to tap in is now.