Ed Gold, a Madison Avenue veteran, has long depended on TV commercials. He hopes he will still be able to do so in TV seasons to come.
NBCUniversal and 21st Century Fox have unveiled separate plans to cut primetime TV ads significantly in the next TV season. Running fewer ads, the networks argue, will make the ones that remain more memorable, and those can be tied more directly to the programs they support. Gold, who oversees advertising for State Farm, thinks the idea is sound but says he’s gearing up for sticker shock. “They can cut down on commercial loads,” he says. “But it shouldn’t be that we are going to double, triple or quadruple the cost of a spot. That is not the game we are all in.”
Coming this fall, along with new comedies and dramas and potential reboots of TV favorites like “Last Man Standing” are the first stirrings of a fundamental reworking of the structure of the television business. Fox intends to offer one-minute ad breaks across its various networks, while NBCUniversal has unveiled bold plans to trim primetime ads by 10% across its broadcast and cable outlets, while offering special “Prime Pods.” Even Pop, a small cable network owned by CBS and Lionsgate, is getting in on the trend, running premieres of its original series with limited ads. “We are doing the math,” says Brad Schwartz, the network’s president, on the number of commercials the network should run.
Executives at ad agencies and TV networks have long called for an overhaul of the medium’s commercial culture, which still depends on interrupting the viewing experience with a bombardment of messages from ad mascots, klutzy guys and savvy mothers talking about what would make life easier for them in the kitchen. It’s 2018, and TV hasn’t done much to get beyond Mr. Whipple, the Charmin-squeezing grocer who couldn’t keep his hands off the toilet tissue he admonished his shoppers to stop grabbing. That stance is changing.
The ideas won’t be put into place with a snap of the fingers. Shows will have to be formatted in new ways. TV networks will likely have to cut back on promos that tout their other programs. Some advertisers may be shut out of the primetime ads that often deliver TV’s biggest crowds. And the networks will have to raise the price of appearing in the new commercial breaks to make up for the money they’ll lose by jettisoning the others.
What’s the fuss? Well, advertisers for decades have paid for commercials based on the number of people who tune in at any given time. Now they are being asked to shell out bigger sums as TV’s overall viewership continues to erode – and pay instead for the opportunity to wave a promotional flag in front of a smaller audience of consumers more likely to be interested in what they have to say. Advertisers may have to stop speaking to the masses and instead recalibrate their pitches for fans of “The Voice”; first-time car buyers; “Walking Dead” aficionados; or chocolate lovers.
Suddenly, the one medium that Madison Avenue counted on to deliver the biggest crowds is being considered as a means of targeting smaller niches. “There has been nothing better than television to deliver a mass audience, and that allows us to differentiate our brands from the competition,” says Gold. Given TV’s inability to halt recent viewer erosion, however, “I am very concerned.”
NBCUniversal isn’t making the switch in haste. The company has spent the better part of a year researching how to rejigger ads to please a consumer while still running a financially sound operation. Executives found they had a significant challenge on their hands. “The consumer will not notice a difference in a show unless you have cut out half of the ads,” explains Mark Marshall, executive vice president of entertainment ad sales for NBCUniversal. “That’s a crazy number.”
After studying as many as 17 different ad formats, he says, executives hit upon a solution they thought could help solve the issue: “What if you reduced half of the ads in one pod, and made that pod something special?”This fall on NBC, elements have been designed so that a viewer of an original episode of “This Is Us” and other NBCU favorites will see the first 22 minutes of a show “and only see one minute of ads,” notes Marshall. NBCU research among 1700 respondents found the new ad format boosted a consumer’s intent to purchase by 9%. The company is studying ways to get viewers excited about the new “Prime Pod” – an on-screen countdown clock and talent shout-outs are among the methods being considered, says Marshall, and NBCU hopes to prod advertisers to launch new products and services and make news when they make use of the format.
Fox is pitching its “JAZ Pods” (just ‘A’ and ‘Z,’ which are the letters used to designate the first and last ads in a break) as a tool that is certain to generate better consumer recall. “One of two spots is clearly better than one of eight,” says Bruce Lefkowitz, executive vice president of ad sales for Fox Networks Group.
TV appears to be borrowing tactics from its past in a bid to boost its future. Decades ago, TV networks ran programs like “Texaco Star Theatre” or “The Colgate Comedy Hour” in which the advertisers had significant, more obvious stakes. With that sort of ownership, the lines between content and commerce blurred.
Some networks have resisted such stuff, but doing so now is almost impossible. A new generation of TV viewers has been taught through use of digital video recorders and streaming video on demand that their favorite programs can be enjoyed with only a handful of ads interrupting them – and sometimes, none at all. “This isn’t about the industry making a choice. This is about consumers making a choice. They lead us, and the business follows,” says Janet Balis, global media and entertainment advisory leader at Ernst & Young. “The fact is we are dealing with a shift in the consumer’s appetite to look at many forms of advertising.”
Ads can no longer interrupt. Now they must be fashioned so they are as much a part of the show as Meredith Grey is to “Grey’s Anatomy” or Jack Pearson has been to “This Is Us.” State Farm’s Gold has had a hand in weaving his company into the plot of an episode of “black-ish” on ABC; creating TV commercials shot in the style of “This Is Us” to attract fans of that drama; and getting the company’s logo and marks on set during Fox’s post-game wrap-up of the NFC Championship. When it comes to sports broadcasts, more networks are considering the use of “features,” or reports about athletes and game play that are tied to an advertiser and appear during the game telecast, not in commercial breaks.
Many marketers agree they need to stop drowning consumers in the usual coterie of ad pitches. The average consumer has “5000 commercial messages they come across every single day, and their attention span is down to five or six seconds,” says Raja Rajamannar, the chief marketing and communications officer for MasterCard. The credit-card company has made a conscious choice, he says, to focus on things consumers are passionate about – music, sports and movies, for example – and devise experiences around them that spur talk on social and digital media.
Relying solely on normal ad channels, he says, would be foolish. The sheer number of installations of ad-blocking software tells him what people think of typical commercials. “Consumers are telling me, ‘I hate your ads.’”
TV ads are set to transform themselves even further. With more people using broadband to lasso their favorite series at times of their own choosing, the interplay of content and commercials is already in flux. Hulu recently announced it would make its programming selections downloadable, and that advertisers could attach themselves to the content. More TV networks are making use of interactive ads served up in digital presentations of their programs on connected TVs and desktops.
These ads can take up an entire commercial break and the viewer can, well, play with them. Car companies already run interactive spots distributed through connected TVs or cable set-top boxes that let viewers use their remote controls to look at different models in various colors or turn a vehicle around to get a 360-degree view. “People are looking at old commercial formats and breaking them and rebuilding them,” says Jacqueline Corbelli, co-founder, chairman and CEO of BrightLine, a technology company that has a specialty in designing advanced advertising concepts
The TV networks’ motivations for changing commercials aren’t all tied directly to viewers.
The bedrock of Madison Avenue is in flux. Big retailers like Macy’s and Sears are facing new competition from online rivals. The auto industry is in the midst of what even its own executives are predicting will be a revolution: an emerging focus on electric vehicles and on forging new relationships not with individual consumers but operators of large fleets. Ford Motor, for example, is placing more emphasis on mobility services and autonomous vehicles and phasing out certain North America car models. Meanwhile, some popular upstart brands of the modern era – Wayfair, Blue Apron, Axios, Dollar Shave Club – got that way by pitching directly to specific niches of consumers and not by using TV as a megaphone to reach big crowds.
The new reduced-ad systems could also aid the TV networks in an ongoing quest. With audiences splintering and migrating to new forms of video, many of the TV companies would love to extricate themselves from longstanding agreements with some of their oldest sponsors. These marketers often enjoy favorable pricing guarantees in an era when TV networks can’t afford to forgo a single dime. NBCU and Fox are offering their new commercial pods as separate items for purchase, and not as part of an advertiser’s overall schedule – meaning everyone must pay the same price for them.
“This is the crux of the issue,” says State Farm’s Gold. “Big advertisers have historically better rates because of our size, and because we have been willing to go in early and buy things earlier than others. To a certain extent, that has been to our benefit. If you are going to put everybody on to an equal playing field where nobody has a pricing advantage, I don’t think the $2 billion advertiser is going to look as well on that as the $20 million advertiser.”
At the heart of the matter is this: Consumers have become so inundated with advertising that they’ve forgotten why it exists. Ads often inform. When done well, they entertain. But more importantly, they bring content to couch potatoes for a reduced fare. You pay for your TV set. You pay for your cable or satellite or SVOD service. But no one puts a meter on your hours of live TV viewing. Advertising plays a significant role in that. Without it, the cost of making many series would be insurmountable for many media companies.
TV networks and advertisers have to re-establish that relationship, says Tony Pace, a marketing consultant who served as CMO of Subway and is president and CEO the Marketing Accountability Standards Board. In the past, “consumers knew the ads were there to pay for the content,” he says. “With the advent of cable, that value exchange has been made really unclear to consumers, and I think that’s to the detriment of the advertising.”
TV has started to feature more commercials that make that relationship more overt Both Apple and American Express run ads of just a few seconds’ length that emphasize their connection to TV programs like “Saturday Night Live” or “The Walking Dead.” AT&T recently ran TV ads that pushed fans of CW’s “Riverdale” to find additional content from the show on Instagram.
Whether any of it can be done at scale remains the question. State Farm’s Gold knows he can’t depend only on chances to embed his company’s ad messages in episodes of “Black-ish” and “This Is Us.” “Those are not things that are available most of the time on television, and they require more time and effort and expenditure,” he says. “In most cases, they are not always easily repeatable.”
If TV networks get out of the business of running dozens and dozens of messages about Swiffers and iPhones and Big Macs, they won’t be in business for much longer. If they can get into the business of giving viewers new reasons to watch those pitches, they might have a fighting chance. It’s a tall order. This year’s efforts, says Fox’s Lefkowitz, “are somewhere between an experiment and the norm.”