How long will TV advertising stick around?

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As Viewers Drift Online, Advertisers Hold Fast to Broadcast TV

The scene outside NBC’s upfront showcase at Radio City Music Hall in Midtown Manhattan last year.CreditBenjamin Norman for The New York Times

TV ratings are collapsing. Media stocks are falling. Cord cutting is accelerating.
There has been no shortage of bad headlines for television networks over the last few months, as investors grow concerned over dropping viewership and as people increasingly find new ways to entertain themselves.

Yet while audience attention has drifted toward platforms like Netflix, Facebook and YouTube, there is one group of stubborn holdouts who are not ready to give up on broadcast television: advertisers.

This week, as ad buyers cram into New York institutions like Radio City Music Hall and Carnegie Hall to watch the broadcast networks talk up a new TV season, they will again prepare to spend as much as $9 billion to be a part of it. Though the market may be cooling this year, a significant drop is not expected.

A reasonable person might ask how, in 2017, is that remotely possible?

“It will continue to move forward this way as long as it works,” said Lyle Schwartz, the president of investment for North America at GroupM, the ad buying arm of the advertising conglomerate WPP.

But isn’t buying a 30-second spot on television a little, well, out of date?

As a media analyst at Pivotal Research, Brian Wieser, put it, advertising on TV is “as archaic as water flowing through pipes.”

“You could set up a drone to take water from a reservoir and use fascinating technology and cutting-edge approaches to deliver it, but there’s a good reason we use these systems,” he said.

In interviews, ad buyers and television executives pointed to a variety of reasons that advertisers remain attracted to ABC, NBC, Fox and CBS. Ratings aside, television still reaches more people and provides a reliable way for an ad to be seen on a full screen with sound. There is a limited amount of inventory, in contrast to the endless reach of the web, and marketers know rates will spike if they wait to buy airtime.

It also does not hurt that Facebook and YouTube have had trouble in recent months with ads showing up next to objectionable content.

“Sales directors at the networks are going to say, ‘We have premium content that is professionally produced, and it’s been vetted and won’t be an issue for your brand to be associated with it,’” said Brad Adgate, a veteran media analyst. “With Google and Facebook, you’ve seen stuff where they’ve had to say that they have to do a better job.”

Still, there are serious questions about how sustainable all of this is. Trend lines certainly suggest things could go in the other direction. Networks are having trouble showing how many people are watching their content across a wide variety of platforms, audiences are growing accustomed to platforms where they can watch shows without commercials, and marketers are eager to find better ways to target potential customers.

And at present, broadcast television is holding an edge thanks to an older audience. The median age for scripted TV’s No. 1 show, “The Big Bang Theory,” and one of its top reality shows, “The Voice,” is 55. Among 18- to 49-year-olds, ratings in broadcast television fell by 11 percent this season.

“If you just look at where the business is going, we’re in a transitional phase now where to a large degree, boomers are keeping television as we define it today afloat,” said Kevin Reilly, the chief creative officer of Turner Entertainment.

Advertisers are aware that this may not last forever.

GroupM predicted that digital platforms would be taking a growing share of new advertising dollars. Still, even though digital players are surging, television remains the established elder statesman for advertisers. GroupM noted that television accounted for 42 percent of advertising investments last year, compared with 31 percent for digital.

The sophistication of Google’s and Facebook’s ability to target ads is no small matter, though, and TV networks have been scrambling to find ways to compete in that arena.

Digital companies are capable of targeting audiences so narrow that they can pinpoint, say, Idaho residents in long-distance relationships who are contemplating buying a minivan. (Facebook’s ads manager says that description matches 3,100 people.)

As attractive as that slicing and dicing can be, television appears to have an advantage in terms of the actual commercial time it can offer marketers.

“It’s great if I can target someone I know is a truck driver who searched for the word ‘truck’ who visited my site a lot, but where do I get them to watch my ad?” asked Joe Marchese, the newly named head of ad sales for Fox Networks Group. “Who’s going to make him or her watch it?”

Ad buyers at last year’s upfronts. As ad buyers cram into New York institutions like Radio City Music Hall and Carnegie Hall to watch the broadcast networks talk up a new TV season, they will again prepare to spend as much as $9 billion to be a part of it. CreditBenjamin Norman for The New York Times

And television still offers an enormous audience.

“The number of minutes we show commercials is way more than YouTube or Facebook on a video basis — many multiples more,” Mr. Marchese said.

Rishad Tobaccowala, chief strategist for the Publicis Groupe, one of the world’s largest advertising companies, said the millions who saw commercials on a hit show like “This Is Us” could also be more valuable.

“If you basically put that same advertising, say a million dollars, within Facebook and Google, the reality of it is that people are going to see those things in a very splintered fashion,” he said.

The so-called upfront season offers advertisers a chance to buy the bulk of their ads before marquee shows return in September. This creates a level of competition that advertisers cannot help but participate in.

It also fosters a power dynamic that probably sounds foreign to a generation of consumers who tend to see automatically placed ads on YouTube content that could have been made a day earlier by anyone.

“What the networks do say is: ‘Great, I’m going to invite all my potential clients and clients to a room at the same time on the same day where I’m going to show my shows that I may or may not actually put up this fall and may not keep for two episodes,” said Dave Morgan, the founder and chief executive of Simulmedia, which works with advertisers on targeted TV ads. “‘And I’m going to make you sit next to your competitors and basically say here’s the price of it, and if you don’t pay this price now, it’s going to cost you 30 percent more in six months.’”

Mass marketers aiming to drive people to, say, their stores or car dealerships rely on long-held TV plans to align with their product launches, and pulling out could be both expensive and risky.

“The reason it’s priced high and reason you have to buy in advance is because your competitors might buy it out,” Mr. Morgan continued. It’s like the Cold War but for brands, he said, adding, “If they have a bunch of missiles, you need a bunch more missiles.”

And so, for a week in mid-May, the networks still have the upper hand.

This article first appeared in www.nytimes.com

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About Author

John Koblin

John Koblin is a media reporter for The New York Times, covering the television industry. He reports on the companies and personalities behind the scripted TV boom, as well as the networks that broadcast the news. Prior to joining The Times, he covered media at The New York Observer, Women's Wear Daily and Deadspin.

Sapna Maheshwari

Sapna Maheshwari is a business reporter covering advertising for The New York Times.

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