NBCUniversal is taking a less-is-more approach to the economics of TV.
The Comcast-backed media conglomerate, which operates NBC, Telemundo, USA, MSNBC and E!, among other TV networks, intends to cut the number of advertisements in its commercial pods during original primetime programming by 20% starting in the fourth quarter, and the amount of ad time during those primetime shows by 10%, said Linda Yaccarino, chairman of advertising and client partnerships, in an interview. Overall, the company will trim the commercial loads in more than 50 original primetime shows across its portfolio of networks, which include series like NBC”s “This Is Us” or MSNBC’s “The Rachel Maddow Show” or any of the sundry Kardashian family series on E!. Commercials in repeats would not be affected.
“There are more and more consumers, whether it’s from Hulu or the Netflixes or Amazons of the world, who are liberated via technology” from having to watch the sheer number of advertisements shown on traditional television, said Yaccarino. “TV networks would be crazy to believe that anything other than commercial overhaul was anything other than inevitable.”
NBCU’s commercial cutback shows the far-reaching effects the viewing habits of a rising generation of new-tech couch potatoes are having on the business of television. Viewers are increasingly accustomed to seeing fewer ads – and sometimes none – when they stream their video favorites. No one who subscribes to Netflix has to watch a traditional commercial for a can of Coke or a Swiffer while binge-watching “Stranger Things,” for instance, and even a viewer who takes up the ad-supported version of Hulu needs reckon only with a handful of commercials. Citing Nielsen research, NBCU said more than 400,000 advertisements had been added to TV networks over the past five years.
NBCUniversal isn’t the first TV company to try its hand at such techniques, which seek to reduce the amount of “clutter,” or advertising and promos, that inundate most TV aficionados. Time Warner’s Turner in 2016 launched a plan for its TruTV cable network under which shows would run longer while being interrupted with fewer commercials. The company’s TNT has run some of its original drama series with reduced ad loads as well. Viacom has in recent years signaled a willingness to cut back on ad time. Fox Broadcasting has run “Empire” with limited ad time across its four seasons on air, and intends to air a March 18th broadcast of its “Family Guy” with fewer ads.
TV networks have been testing the concepts for years. In 2008, Fox Broadcasting unveiled a plan to run two new dramas – “Fringe” and “Dollhouse” – with fewer ads. The programs would “have more entertainment for the consumer,” said Jon Nesvig, then president of ad sales for the network, during a presentation to advertisers, “and more impact for your commercials.” Back then, the idea was to keep viewers who had grown accustomed to skipping past ads with the use of a DVR. In 2018, however, TV networks are trying to grab on to ad dollars that sponsors could instead allocate to digital-media venues. In the past two TV “upfront” markets, when U.S. TV networks sell the bulk of their ad time, TV benefited while digital outlets like YouTube and Facebook grappled with advertiser concerns about off-color content and shaky measurement policies.
And yet, ad loads have recently increased. Brian Wieser, an analyst for Pivotal Research who tracks advertising minutes on TV, found national commercial loads across the industry rose 3.9% on average in January to 11 minutes per hour – a sign that TV networks need to run ads more often to generate the impressions they’ve guaranteed advertisers while audiences erode. “I can’t say it has been successful based on the data I have seen,” said Wieser about reducing ads. “Budgeting for TV will generally be independent of the quality of the ad units available, which means even if reducing is the right thing and networks will be better off in the long-run if they reduced loads, the short-term impact is probably negative, which is why we are seeing continuous increases in overall ad loads, despite individual networks reducing them.”
NBC has evidence to the contrary. Ad prices for”Saturday Night Live” have soared since NBC agreed in 2016 to cut 30% of the show’s commercial load. To be sure, the program now airs in primetime in some parts of the country and has gained new relevance in the wake of Donald Trump’s election to the White House.
But that show’s recent direction may serve to answer the question of how NBCU expects to generate the same or even more advertising revenue as cuts back on individual ads. NBCU intends to introduce a series of new ad formats that Yaccarino said would be of more value to advertisers than traditional 30-second commercials.
One of these is called a “prime pod,” a 60-second piece of national ad time that will appear in the first or last break of a show that will feature just two sponsors who can run commercials that play off the programming they support, as well as other elements. NBCU has developed technology that can identify themes and segments with which marketers can align. The company has also developed commercials that allow advertisers to provide real-time commentary in ad breaks just as they might on Twitter, or to embed pieces of content developed by digital partners such as Vox Media, Buzzfeed or Snap (all of which count NBCUniversal as an investor). Another one will allow the TV broadcast to stay on the air in some fashion while commercials or ad messages play in other parts of the screen. NBCU’s version would have the ad messages play off the content next to which it appears.
NBCU intends to emphasize the ability of the new formats to drive consumer recall, engagement and purchase conversion, Yaccarino said. “These are performance metrics that matter,” she said. “I continue to be unsure of what a ‘C3’ or a ‘C7’ ratings tells you three weeks after the fact other than your age and gender split,” she added, referring to the industry’s current measurement standard of measuring views of commercial breaks up to three or seven days after they air. “This is a whole sales effort to adopt a new vocabulary and conversation.”
The announcement marks the culmination of two years of testing by NBCUniversal, said Yaccarino. And it marks a new step in a quest she has pursued for years. While overseeing ad sales for Turner’s entertainment networks in the earlier part of the decade, she started an 18-month initiative to build new software and hire staff to tag specific segments on movies and TV shows so that advertisers could identify specific moments for relevant messages, like a tissue commercial during a sad TV moment. “That was a very manual effort,” said Yaccarino. NBCU’s latest attempt to help marketers identify such stuff will be powered by artificial intelligence.