The US TV market is at the forefront of some key technological
forces reshaping the TV advertising market. Globally, industry
research indicates that at least 22 percent of TV advertisements
are being skipped in homes equipped with PVR/DVR technology. In
US homes with PVR/DVRs, the proportion of ads skipped is as high
as 50 percent. This makes the US an ideal testing ground for the
effect that these disruptive technologies will eventually have
globally, and for the strategies that companies should pursue to
ensure sustainable high performance .

The current industry consensus is that the cost per thousand
viewers (CPM) rate in the US TV advertising market will rise by
an average of 6 percent compounded annually through to 2010.
Accenture’s analysis suggests that this estimate is far too
optimisticWe believe a combination of three factors—continued
fragmentation of the viewing audience combined with additional
competition for viewer share from the top cable/satellite
channels; increasing available options for advertisers; and
greater demand for accountability for the results of TV ad
campaigns from advertisers—will restrict the compound annual
increase to just 3 percent.

However, an important counter-view expressed at the 2005
Accenture Global Convergence Forum was that the eventual
solution the industry develops will, by definition, engage and
target viewers more effectively. This being the case, the effect
would actually push growth in average CPM significantly higher.
The key issue is the difference between a straight-line
projection of the industry and an inflexion point that changes
its course more dramatically. Our contention is that all parties
need to plan for both scenarios.

Analysis

Accenture analysis of third-party primary research underlines
the potential impact of ad skipping on TV advertising. As Figure
2Figure 2 shows, the 8 percent penetration of PVR/DVR homes in
2004 results in just 2 percent of ads being skipped, hardly
commercially significant. But, using the conservative assumption
that ad skipping will continue at the same rate in PVR/DVR
homes, the 40 percent penetration expected in 2009 will mean
close to 10 percent of ads being skipped. Advertisers may be
able to live with 2 percent, but 10 percent is something else.

A further complication is that skipping relates closely to
time-shifting and the propensity for viewers to time-shift
varies by type of content. While they are highly likely to
time-shift movies, drama or kids’ programming, they are far less
likely to do so with live sporting events or news, where
real-time viewing is a key part of the experience.

Already, different players are applying various tactics to stop
or neutralize the effect of skipping, ranging from changes in
the programming schedule to product placement to providing true
live video on demand (VoD).

But addressing ad skipping by restricting viewer behavior can
only be a short-term solution. Our analysis and industry
experience suggest that the only way to get people to watch ads
in the long term will be to make them want to watch them. This
means blending compelling creativity from the content side with
tighter targeting through new technologies, and being able to
monetize the resulting “eyeballs” by understanding what
interactive ads do best: generating cost-effective sales leads
for bigger-ticket, relatively complex and/or programming-related
products.

Recommendations

The TV advertising value chain is at an inflection point—one
that is overturning long-standing economic assumptions and
breaking down the formerly clear-cut divisions between the roles
and skill-sets of the key players. We believe that
platform/access providers and broadcasters facing these
challenges need to keep three behavioral characteristics in view
to maximize their chances of success:

- Manage the business against parallel models and
scenarios—Accenture’s current view is that CPM could, in the
medium term, continue in a relatively straight line. But the TV
ad market is entering uncharted waters. Given the dynamic,
fast-changing and unpredictable period the industry is now
entering, companies cannot discount the emergence of far more
dramatic scenarios. So it will be crucial to maintain agility
and flexibility and plan at least two scenarios for the business

- Adjust more readily and responsively to the emerging needs of
advertisers—A key success factor will be the ability to move to
meet the real needs of advertisers. This goes far beyond simply
selling them airtime. It involves focusing more holistically on
the return on objectives that advertisers actually get for their
ad dollars, and on what they are trying to achieve commercially.
Ultimately, advertisers want to sell their product and new
technologies mean they are inevitably reconsidering the role TV
advertising plays in this.

- Co-operate, co-operate, co-operate—No-one has a “silver
bullet.” To succeed, broadcasters, access providers and
advertisers all need to be ready to work together, share ideas
and see things from each other’s point of view. This
collaboration must crucially include the creation of agreed
technical standards and of objective third-party measurement
systems at a granular level. No single industry grouping can do
all this on its own.

In the post-PVR/DVR TV advertising industry now emerging, the
only certainty is that new models and techniques will emerge—and
the provider that can think from its own customer’s point of
view will immediately be one step ahead. The TV advertising
industry has always thrived on change and creativity. While the
technology may have changed, those two touchstones will continue
to determine the difference between success and failure.

For more information, please contact Accenture at 1 (312)
737-8842

Theresa Wise
http://www.articlesbase.com/advertising-articles/tv-advertising-interactive-or-bust-330.html

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Tagged with: Accenture • Bust • Cable Satellite • Contention • Disruptive Technologies • Forefront • Fragmentation • Global Convergence • Industry Consensus • Proportion • Satellite Channels • Scenarios • Straight Line • Technological Forces • Top Cable • Tv Ad Campaigns • Tv Advertisements • Tv Advertising • Tv Market • Viewing Audience