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How TV Can Succeed In The Digital Age

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This article is more than 8 years old.

This article is by Daniel Schiffman, cofounder of TVisioninsights in Boston and a graduate of the MIT Sloan School of Management’s MBA program.

The media landscape has changed tremendously over the past year, and as we look ahead to 2016 a big question is: What is the future of TV? Television has long been the leading medium when it comes to American video consumption, but the landscape is quickly changing. Traditional TV is seeing competition from video streaming providers like Netflix and Amazon, Over-The-Top (OTT) devices such as Chromecast and Roku, and streaming content on a myriad of personal devices.

While big data is a powerful tool, it hasn’t yet unseated TV from its place at the head of the pack. A Nielsen Total Audience Report for Q2 2015 shows that adults 18+ spend more than 32 hours a week watching television, giving TV a 95% share of all video viewing. As for advertising, TV is where we see the majority of spending. It’s a $72 billion-a-year industry in the U.S., compared to $50 billion for digital advertising. However, if TV is going to stay the leader amid this digital disruption, it needs to make some changes – and make them fast.

Not surprisingly, we’re starting to see TV experiment with alternate data collection methods. The traditional means to obtain data about television viewership has long been the Nielsen rating system. That is based on a panel of roughly 25,000 homes in the U.S. and collects data once every minute. However, it really only tells us what is on the TV screen in that home. It doesn’t show if anyone is actually in the room watching the TV, or, if they are in the room, whether they are attentive to the program. Yet Nielsen has long set the standard for telling us what Americans are supposedly watching, which sets the pricing for TV advertising.

A newer player in this space is Rentrak. This company buys data from the cable companies to sell in a subscription model, but it only knows what channel is on the set-top box. Privacy issues present another challenge, as they limit the company from selling certain types of data. Nonetheless, the company is gaining traction. In November, Fox officially announced it would stop using what had been an industry standard for ratings (“Live+Same day”) from Nielsen, as viewing habits have changed substantially making these numbers inaccurate.

Traditional TV manufacturers have also entered the TV data scene. For example, VIZIO uses a smart TV chip that monitors video sent to the screen. VIZIO – and others in the “Smart TV Screen Scraping business” -- still face the major limitation of only knowing what is happening on the screen. Like Rentrak and Nielsen, they don’t know if anyone is actually paying attention.

It’s theoretically simpler on the Internet where you can track whether someone who was exposed to an ad for a particular product then purchases that product. You can even customize ads on the internet based on browsing history. We’re not there yet with TV, but this is precisely where television needs to go in order to survive. It needs better ways to analyze audience engagement, activity, and emotional reaction to programming and advertising, and to utilize that data to target ads similar to digital.

The future lies in the ability to connect that analysis to track sales as a result of TV advertising. For example, a company could launch a TV ad campaign in a specific region and then use this type of analysis to determine who attentively viewed the ad and then purchased the product. That builds a more robust case for TV advertising than simply saying the ad aired in X number of households.

Another interesting development is the use of social media to mine data. Despite MTV’s lower ratings, that network has one of the most engaged audiences in terms of social media behavior. The traditional rating system doesn’t capture attentiveness of the audience, but social media does – and that shouldn’t be underestimated.

Programmatic or addressable TV is a promising development that may help television evolve. This concept involves the targeting of TV advertising on a more granular basis. For example, you may have seen an advertisement for a local company that only airs in your zip code. The dream is to have the ability to show particular ads on TV based on an individual’s demographic profile and perceived relevance for that advertisement.

As for the ads themselves, we’re seeing some experimentation there as well. Fox is now testing a new format that gives viewers a choice between two types of ads. The idea is that viewers may be more engaged in advertising content that they have made a conscious choice to view. And ESPN is widely seen as the current leader in trying unique, innovative ad formats given the high level of attention paid to live sports.

No matter how TV attempts to enter this brave new world – with changing measurements and formats – the key to success lies in having and using robust data. As for who will succeed, only time will tell.