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Most TV Viewers Hate Commercials. AT&T Thinks it Can Solve the Problem

SANTA BARBARA – The modern TV viewer would prefer to do away with commercial breaks, but executives at AT&T think they can get consumers to pardon the interruptions.

Speaking here before a crowd of media buyers, Madison Avenue honchos and entertainment executives Tuesday, AT&T’s advertising architect unveiled the telecommunications company’s new ambitions to monetize its $85.4 billion purchase of Time Warner. The plan, says Brian Lesser, chief executive of the company’s new advertising unit – now known as Xandr (after Alexander Graham Bell, inventor of the telephone) – is to use digital technology to deliver commercials tailored to individual viewers and households.

“Content is as great as it has ever been and ads are as sophisticated as they have ever been, and  yet people still hate advertising,” Lesser told reporters in advance of his presentation. “They hate it because it’s interruptive, it’s disruptive, it’s not engaging and it’s not always relevant.”

And yet, the media industry needs to run commercials, he said, particularly in an era that features so many series that garner much critical acclaim. “If we are to continue this pace of developing content of this quality in these volumes,  then we need advertising to pay for some of the content,” he said. “I don’t believe – nor does anybody on the team believe – that subscription video on demand services could possibly pay for all the content being developed” without relying on money from advertising.

His philosophy so far has not been echoed by  SVOD titans like Amazon and Netflix, which do not run traditional video commercials, allowing fans of series like “One Day at a Time” or  “The Marvelous Mrs. Maisel” to view them without the slightest hint of a pitch from Coca-Cola or Apple. Both allow product placement in certain series, and Amazon runs clickable banner ads on some of its home screens.

AT&T intends to launch new kinds of TV ads, , Lesser said. One concept the company is showcasing at an exhibit here would place a full-motion video commercial on a screen whenever a viewer decides to pause a show. AT&T is also working on “shoppable commercials” that would allow viewers to buy what they see during an ad break – or even products they spot in a show itself.

Lesser suggested the company would begin to roll out “overlays” or on-screen “icons” that viewers could click on via use of their remote controls or voice commands. They would then be able to pause the content and spend time with an ad, perhaps even learning how the product being pitched might be purchased.  The company could use viewer data to make certain the ads sent were in line with viewers’ interests.

“Good advertising needs to be directed to the right person, the right household, the right family –  in an engaging way that’s not interruptive,” Lesser said

AT&T is relying on research that 66% of consumers wish advertisements were more relevant to their interests and lifestyle, and that 57% feel ads are not relevant to them. AT&T found 70% if consumers like when ads go beyond just selling a product.

And the company is working to strengthen its leverage in the marketplace. Xandr has struck agreements with Altice USA and Frontier Communications to aggregate and sell their national addressable TV advertising inventory. 

AT&T isn’t the only media company trying to figure out how to get a growing number of consumers to engage with ads after they’ve grown more accustomed to doing without commercials when they watch Netflix or Amazon. NBCUniversal, for example, plans to cut the number of commercials it runs in many of its original prime time series this season.

But AT&T may have more to prove. The company has thrust itself onto the media landscape by snapping up Time Warner’s HBO, Turner and Warner Brothers. Meanwhile, rivals like Comcast and Walt Disney are also expanding by snapping up assets like European satellite broadcaster Sky or a giant chunk of 21st Century Fox.

Media companies need to keep ad dollars flowing if they wish to keep producing more video series, Lesser said. “There is a future where advertising can be relevant,” said Lesser. “It can matter to consumers, and we can fuel the great content being developed.”

 

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