Viacom To Cut Back On Primetime TV Ads Starting In October (Exclusive)

Philippe Dauman Viacom Earnings
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Can a TV network wring more value from TV commercials if it runs fewer of them? Viacom is about to find out.

The company, which owns MTV, Nickelodeon and Comedy Central and has suffered significant ratings declines in recent months, will in October begin to run fewer minutes of commercials in primetime on all of its networks, according to an executive familiar with the situation. Where Viacom has been running between 17 and 18 minutes of ads per hour, it will now try to run between 14 and 15 minutes, the executive said. Should the effort produce positive results, Viacom could consider expanding it to other times of the day.

Viewers may love the idea of having to watch fewer commercials, but Viacom’s move is not entirely altruistic. The company owes what is known in the business as “make goods,” or additional commercial inventory given to advertisers when programming fails to meet ratings levels previously guaranteed in pricing negotiations.

Viacom will award its biggest advertisers more ads that appear in the first slot of a commercial break, according to the executive, as well as promotions that are woven more closely into programming, such as a “billboard” that tells viewers directly that a show is sponsored by a particular marketer. Running fewer ads will let Viacom “de-clutter” its schedule in terms of the number of commercials shown and also satisfy what it owes individual advertisers, the executive said.

Speaking at an investor conference Friday, Viacom CEO Philippe Dauman alluded to the effort, suggesting the policy might result in fewer ads, but that the remaining commercials would be priced higher.

On Madison Avenue, Viacom has over the years developed a reputation as an “overstuffer” of commercial breaks – running ads multiple times to generate a required number of viewer impressions despite fluctuations in viewership.

In 2010, for example, the company’s Spike network broke up reruns of the HBO comedy “Entourage” into small segments so that the show could accommodate commercial breaks that lasted as long as eight to ten minutes. In 2012, Viacom’s TV Land ran so many commercials in a three-hour time period that it only had room for five episodes of sitcoms, rather than the six that might normally fill a schedule of that length.

“We think it’s gotten worse,” said one media-buying executive familiar with the Viacom networks’ advertising policies, who spoke on condition of anonymity so as not to upset discussions with the media company. “We clocked an eight-minute break” during a recent weekend.

Viacom isn’t the only company to brandish the technique, which has become more widely adopted as many TV networks grappled with an exodus of viewers to streaming video and mobile devices. In recent months, TV outlets owned by A+E Networks and AMC Networks have also increased commercial loads, according to research from Todd Juenger, a media-industry analyst with Bernstein Research.

In the second quarter of 2015, Juenger found ad loads at Viacom’s BET, MTV and VH1 had increased 15% and 11% and 11%, respectively; ad loads at A+E’s FYI and History were up 11%; and ad loads at AMC and WE rose 12% and 7%. In comparison, ad loads at Time Warner’s TBS were relatively unchanged during the period and fell 1% at Discovery Communications’ Discovery Channel.

Ad clutter has been on the rise at both cable and broadcast for years. In 2009, for example, broadcast networks on average ran 13 minutes and 25 seconds of commercials per hour, according to data from Nielsen. In 2014, that average had risen to 14 minutes and 36 seconds. Cable networks in 2009 ran an average of 14 minutes and 27 seconds of ads per hour, Nielsen found. In 2014, that average had increased to 15 minutes and 49 seconds.

If those numbers still hold, Viacom’s new primetime ad breaks would be in line with the rest of the industry’s.