Bill Niemeyer, Senior Analyst
December 9, 2011
CBS Chief Research Officer David Poltrack spoke at the UBS Media and Communications Conference on Monday and said (as reported by Multichannel News) "...a viewer streaming our program online is now worth substantially more to us than a person watching that program in playback mode and skipping many of the commercials....In fact, the value of the online viewer is now surpassing that of the live viewer as well."
Poltrack added (as reported by MediaPost), "This is a significant tipping point."
Wow-quite an observation coming from someone who's been the CBS research chief for 17 years. And he's right, this is a tipping point. It's no longer a question of whether online and other digital platforms like OTT can monetize video content better than TV (at least on a per-viewer basis); it's now a question of how fast can business practices and consumer behavior change to leverage this knowledge.
How did CBS get to this tipping point? While widely known that online runs of primetime broadcast TV shows generate higher CPMs than live TV runs, the total revenue generated per show has been lower for online due to its lower ad loads. Poltrack says that CBS is now running 10-14 ads/hour for online programming, much greater than the 5-6 ads/hour when CBS and the other big four broadcast nets first started showing episodes online. And a lot lower than the nominal 32/hour of national ads, local ads, and promos seen in live TV.
Is CBS alone in reaching this landmark? Unlikely, as the remainder of the Big Four (ABC, FOX, and NBC) have probably reached this level as well. In 2012, as TVE efforts are more fully executed, cable networks will enjoy similar rewards. Within a short time, they too will reach per-online viewer revenue parity. Hulu is either already there or soon will be.
What of Jeff Zucker's (the former head of NBC Universal) 2008 warning about "trading analog dollars for digital pennies"? (True, all TV is digital now but we know what he meant.) Yes, major TV networks can now get more money per viewer online than on TV, but we will have to see what happens in the aggregate. In 2010, total online video ad spending ($1.4 billion according to the IAB) was still a fraction of the total TV spend ($69 billion according to Nielsen). Does this mean the TV network pie from all sources will get larger or smaller? Sorry, it's yet another wait and see.
One clear message from this "tipping point" proclamation: if you want to preserve your current business model (hello multichannel operators) or establish a new one (hello OTT landscape participants), you had better be underway with your response. ABC was the first of the 'Big Four' broadcast nets to go online with full episodes in 2006. In other words, it's taken over five years of effort for the major broadcast networks to reach this landmark. The broadcast majors (yes, supposed Old Media) have a multi-year head start on many content providers towards understanding how to get to and surpass that online vs. TV 'tipping point' for ad-supported video.
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