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Television’s Last Stand

Once again, the television industry has shot itself in the foot, refusing to agree on a universal standard for measuring non-linear viewing and thus delaying the launch of the sort of robust, full-featured and modern TV Everywhere (TVE)-style ecosystem that just might save the industry from itself.

While the blow is not yet fatal, give it a year or two and it will be: it’s not the number of unwatched channels that frustrates viewers, it’s the antiquated interfaces, byzantine viewing restrictions and seemingly punitive practices like non-skippable commercials on VOD. Call it paying Nordstrom prices for Kmart service. If Netflix, which costs $10/month, can provide a slick, recommendation-based interface that looks like it was designed sometime this millennium, why can’t America’s pay-TV providers, who charge their customers ten times as much?

The story of TV Everywhere’s failure starts in 2011, when several major MVPDs launched their own TVE apps, both as a way to combat the growing threat from Netflix, and as a way to increase customer satisfaction. They were promptly sued by the networks who claimed their carriage agreements did not extend past the set top box. One key part of the networks’ rationale, which was hard to argue with, was that all these new nonlinear views were not being counted by any universally agreed upon ratings system, and as such, they were losing revenue.

Nielsen, the company that has long provided the universally accepted measurement system for linear television went to work on providing a system for non-linear viewing, as did rivals like comScore, Rentrak, Kantar and others. But nothing seemed to work for the networks and TV Everywhere remained a pipe dream.

Meanwhile, Netflix and other streaming services were winning over millions of viewers. What those companies offered (in addition to ad-free viewing and intuitive, recommendation-based interfaces) was something known as quantum viewing: the ability to begin watching a show on one device and then pick it up on another, in the exact spot you left off. This feature was immensely popular with viewers and led to the rise of the phenomenon known as “binge viewing.”  While DVDs and DVRs had been around for years, it was quantum viewing that seemed to give viewers permission to binge view, catching up on series they’d missed and discovering new ones.

Meanwhile, linear TV chugged along much as it had since the advent of cable in the 1970s: viewers could only watch via a provider-supplied set top box. They could record a show on their DVR (if they’d thought about it in advance) or they could try and navigate their provider’s byzantine Video On Demand (VOD) system. This proved to be doubly frustrating however, as contracts that had been put in place before the advent of Netflix generally limited VOD availability to the last five episodes of the current season. If the series was already up to episode seven, you were plain out of luck.

In 2016, Nielsen tried again, rolling out a system it called “Total Audience Measurement” (TAM) that was meant to measure the totality of non-linear viewing. It would even measure commercials separately from the programs they ran on, as time-shifted viewing often meant the two metrics did not match up.

Unfortunately, they were shut down again this year, with NBC and other networks announcing that they would not be using Nielsen’s new Total Content Ratings (TCR), the last piece of TAM, that was scheduled for release in March 2017. While many speculated those decisions were based on a fear of bad results in advance of the upfronts, the period in May when networks sell the bulk of their ad inventory, the end result was the same: the industry missed a chance to introduce a game-changing interface upgrade that could help change the current negative perception of pay-TV.

It’s easy to understand why the major networks and studios fear the advent of an on-demand TV Everywhere ecosystem and want to delay its implementation for as long as possible: they still operate in a world whose economics are largely based on the notion of selling ad space to brands who want to reach the largest number of people in a single buy.

In the old world, viewers who wanted to watch Friends had to tune in to NBC on Thursday nights at 8PM. That was an easy target to sell ads against. The new paradigm, where a viewer might not start watching Friends until Saturday night, and then only watch half the show, finishing up on their iPad on Monday morning, is much harder to sell ads against. It requires a lot more work, a lot more reliance on algorithms and programmatic technology, along with a better, data-driven understanding of the audience segments the brand wants to reach.

What’s more, it’s not guaranteed to work: this sort of audience-based system has never been tried before on television, at least not on a large scale basis, and many network executives fear that their revenue, which now sits at around $70 billion per year, could quickly head south. “A race to the bottom” is a phrase one hears fairly often in regard to programmatic and addressable.

Unfortunately, it’s a very short-sighted way to view the world, because defections due to overpriced systems with out-of-date interfaces will cut network and studio profit margins much more deeply than any shift to addressable or reliance on non-linear ratings ever could.

This is not some random theory. Comcast, the one pay-TV provider to actually invest in a more streamlined recommendation-based interface, one that now includes both Netflix and YouTube, is also the one cable company that’s actually seen its subscriber numbers grow over the past year. That’s even more remarkable when you consider that not too long ago the company was mostly known for giving birth to the hashtag #ComcastSucks.

Comcast isn’t the only one. Layer3, a start-up out of Denver, has raised $80M for its high-end service, which features a stunningly beautiful interface and white glove service, complete with Tesla-driving installers. They’re banking on the theory that there’s a segment of the TV-viewing audience that’s willing to pay Neiman Marcus prices for Neiman Marcus service.

But none of this will matter if the networks can’t agree on a way to measure all that non-linear viewing so they can actually start to monetize it. And they need to do it now, before it’s too late.

Nielsen’s TAM and TCR may not be perfect, but the industry needs to stop waiting for perfect and start making changes immediately, before consumers walk away for good. It’s been six years, and we’re at a point where any money the networks stand to make by waiting for super accurate non-linear ratings is more than offset by the money they’ll lose as viewers abandon the system.

To make these much needed improvements happen, the networks need to agree to use Nielsen’s TAM and TCR as currency for non-linear viewing and to allow pay-TV providers to finally launch robust TV Everywhere-style apps that are the equivalent of (or better than) anything Netflix has to offer. More accurate numbers from smart TV Automatic Content Recognition (ACR) services like iSpot can always be introduced later on and provide an easier path to monetization by tracking both audiences and purchases. But the industry needs to make these long-awaited changes now, while the audience is still willing to give them a chance.

The industry then needs to stop tying the hands of pay-TV providers and let them get rid of set top boxes and replace them with well designed, easily updatable apps with features like quantum viewing. They need to let providers do away with their antiquated grid-based interfaces too, in favor of ones that are based on recommendations. So that “what’s on now?” can become “what do you want to watch?”

Change also means studios letting viewers have VOD access to every show once it’s already aired, so they can catch up or binge watch without having to resort to Netflix or Amazon. Which means the end of the DVR, since everything will be available on demand anyway.

Finally, the industry needs to ensure that these new systems include providers like Netflix, Hulu, Amazon, Facebook, YouTube and everyone else who is making high quality video programming. Long-form and short. Because viewers are going to watch those platforms anyway, and if the industry makes it easier for them to do so, they might just stick around to watch the other programming their pay-TV service has on offer.

Do all this, and you’ll have a system that people won’t mind paying $100/month for.

Do all this, and you just might save television.