By: Barlow Redfearn on 13-05-2014 in Marketing News, Online Marketing, Technology, Video

With more and more viewers subscribing to digital television services like Netflix, the industry is evolving. But maybe not as fast as many commentators think.

‘The question is whether—and in what form—the long-term conceptual concerns that have bound definitions of television together will rebound as the stability of the medium, imposed since the 1950s by governments and the electronics industry, gives way to new articulations of the televisual’ [William Uricchio]

Time spent watching TV - Think TV Australia 2013

The rise of digital television platforms such as Apple TV, iView and Netflix has led many media commentators to toll the bells for traditional television. Yet, while its impossible to ignore the growth of digital television, most Australians still remain faithful to their TV set.

In fact, the amount of time the average Australian spends watching their TV has changed little over the past five years according to Think TV.

So whilst viewers – especially those under 30 – are increasingly consuming more content via different mediums, according to Think TV’s data from late 2013, the average Australian still watches 768% more television than online video. This will undoubtedly change over the next 10 years, but right now, the vast majority of Australians still love their telly. And while you could argue one of the major reasons for this is the widespread availability of pay-TV options like Foxtel, a recent report by the Sydney Morning Herald highlighted that only 1 in 3 Australians is connected.

Commercial Networks on the Blink

Despite Australia’s loyalty to the traditional TV set, our three commercial networks are struggling to survive and adapt to a world of multi-screen digital viewing options. Data from the Australian Stock Exchange [ASX] shows Channel Ten’s share price in free fall, plummeting from $4 in 2005 to its current value of $0.27 a share. A similar fate has been shared by Channel 7. whose share price has dropped from its 2007 peak of $16 to its current value of $1.80. While the ratings for both Channel 7 and Channel 9 are still relatively strong, consistently hovering around the 30 per cent mark of total viewership on a typical weeknight, Channel 10 is well and truly on the blink with ratings consistently languishing in the low teens.

Gyngell and Packer Brawl in Bondi

Content is King

While the development of digital television and the growth of internet display advertising are in part responsible for Channel 10’s declining advertising revenues, the driving force behind the decline of this once profitable network is its programming. If Channel 10 were buying, or better yet producing, content people actually wanted to watch, people would watch. As Jacob Klein from Distilled points out, a screen is a screen is a screen:

“Whether you’re watching Breaking Bad behind the glow of liquid crystal, light emitting diodes, electrolyzed plasma or a cathode tube is it not still essentially the same, wildly successful medium? Does the effectiveness of the content itself or the ads supporting it diminish due to the size or location of the screen it’s being watched on?”

The Winds of Change are Blowing Across the Pacific

The growth of Netflix and its evolution from DVD delivery service to video streaming king pin is seen by many as a threat to both cable and commercial television in the United States. Despite the fact Americans continue to watch a large proportion of television via their TV set – the average American over the age of 2 spends more than 34 hours a week watching live television, according to Nielsen – recent research by UK online marketing company, Distilled shows that over past two years the number of people subscribing to Netflix has grown exponentially.

What you want, when you want, commercial free

Whilst television sets remain a much used, utilitarian fixture in both Australian and US dwellings, the promise of Netflix and other digital streaming avenues has commercial television networks across the globe worried about the future.

With 48 million global subscribers according to Netflix’s first quarter 2014 earnings data, the world’s leading internet television network is seriously challenging US cable networks with its low membership fees and abundance of quality content. But it’s the company’s ‘what you want, when you want’ mantra that’s driving its booming success; a philosophy that was keenly demonstrated when it released the second season of its acclaimed television series, House of Cards, in its entirety.

Netflix's House of Cards starring Kevin Spacey

The Evolution of Netflix: From Content Distributor to Content Creator

The US adaptation of the BBC mini-series, House of Cards, is Netflix’s ‘ace in the hole’, and a true threat to conventional television content creation and distribution. While Netflix’s distribution of anticipated and successful major network content is a disturbance to conventional television, House of Cards poses a whole new type of threat.

By producing House of Cards, as well as distributing it, Netflix has forged itself a highly desirable position in the market, a position that the likes of Apple could only dream of. In fact, while Apple remains fixated on negotiating distribution deals with the major networks in a bid to get its Apple television set off the ground, Netflix is producing its very own program. Albeit one that’s popularity, as Derek Thompson notes in The Atlantic, is almost impossible to quantify with any real precision.

The production and distribution of House of Cards is a highly destabilising event for traditional television. So, whilst the figures, both in Australia and the US, point to the short to medium term survival of traditional television, the fact an online distribution channel can produce a show – and one as successfully and seemingly popular as House of Cards – is an ominous sign for their existing business model. Especially when one considers that Microsoft via Xbox Entertainment Studios is about to enter the world of television content creation and distribution, as well as its arch nemesis Sony who are in the process of developing original programming for its Playstation console.

Marketing Opportunities in the Age of Digital TV

As it stands, television remains the world’s favoured advertising medium, with 57 per cent of total global ad spend according to Nielsen, but in Australia the rapid growth of digital display advertising is of great concern to commercial television operators. Data released by PricewaterhouseCoopers in February of this year shows online advertising expenditure [in all its myriad forms] has now surpassed Free to Air TV ad spend. A trend that presents a wealth of opportunity for digital marketers.

As more and more people sign-up to services like Netflix [even if they don’t officially launch in Australia tens of thousands of Aussies currently access its services via a virtual private network] digital marketers find themselves presented with vast amounts of minable data on viewers, the type of targeted data traditional TV marketers could only dream of. As Jacob Klein at Distilled points out:

“for marketers, one disadvantage of the classic television delivery system was that they possessed little to no information on their viewership other than the broadest of data sets (18-45 year olds watching in “prime time hours” etc.).”

The data available to distributors like Netflix is vastly broader. If Netflix so chose they could mine for data as specific as: where we watch, what device we use, and even our complete viewing histories, data that would allow advertisers to target audiences in a decidedly more specific way than traditional television ever could.

We’ve devised a quick quiz to find out how you, the dear reader, consumes your favourite televisual content. Whether you’re a traditionalist, a mobile tablet consumer, or a buccaneering piracy enthusiast, we’d love an insight into your unique viewing habits.

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