My thanks to TV Week for publishing a version of this article on January 19th, 2009.

Television in 2009: Will The Recession Save TV from Itself?

2009 will put stress on the TV industry because the TV business has grown disingenuous. Hardware and software industries revolutionize the ways that we use our TV set while advertisers cling to the notion that viewing behavior isn’t changing much. TV content is increasingly cluttered while TV carriers provide clutter avoidance software. Advertisers demand big ideas that integrate the product into the program but tolerate commercials that lack a big idea. Advertisers pay a premium for reach but fragmentation undermines scale. We can’t blame technology for changing the consumer's TV viewing behavior until we confront our own conflicted practices.

Television has evolved its business model since the birth of cable.  TV content was funded entirely by advertisers in the 1970’s. Now, the NCTA reports that Cable systems’ subscription revenue in 2007 was about $75B while Ad Age reports that the 100 Leading National Advertisers spent about $30B on TV advertising. Whatever data you choose, the sea change is evident. The content providers need to sustain ad revenue while the content carriers need to super-serve the subscriber.  One might expect that these co-dependent industries would operate in a complementary fashion with the goal of optimizing both revenue streams. But, the reality is that they operate like competitors battling for their share of the subscription revenue pie. Subscriber revenue is now the priority.

Constituencies that depend on TV commercial revenue continue to point to Nielsen data that indicates that time spent watching TV is healthy. Nobody disputes this. It’s time spent watching TV commercials that is in trouble. As the TV becomes a computer, it is being used for many other things besides watching TV shows in real time.

During the last boom, the focus of TV advertising investment shifted towards ideas that happened outside of the ads. For example, there was more industry attention paid to the integration of AT&T and Coca-Cola into the “American Idol” program than to the ads those sponsors ran during the show. The emphasis on “creativity” being about something other than the advertising correlates to the unbundling of ad agencies into distinct media and creative services. Advertising agency dis-integration made it harder to keep the focus of media value concentrated on the commercial itself.

Despite these trends, let’s take one moment to remind ourselves that the TV commercial is still a powerful tactic. For decades, the cost of TV advertising went up faster than the rate of inflation but the demand for inventory did not go down. The reason is that the value of TV commercials was greater than the price. Today, how many people who buy and sell TV advertising have any idea if the value is aligned with the price?

From the marketing side, the experts on digitally empowered consumer behavior and the experts on TV advertising almost never sit together to talk about strategy. Clients get what they pay for. They ask for integrated communications strategies but they pay for dis-integrated specialists.

So, let’s cut to the chase about why consumers avoid TV commercials. Don’t be distracted by articles lamenting the onward march of commercial avoidance technologies. TiVo is not the problem. The primary reason why consumers are avoiding TV commercials is clutter. The second reason is irrelevant commercials.

Consumers still watch commercials. They ignore irrelevant messages and they avoid commercials altogether because the pods are so long but they appreciate relevant commercials and will engage with the marketer when a smart commercial asks them to do so.

Let’s hope that this recession will see a shift back towards the importance of the TV commercial. TV commercials are scalable and repeatable opportunities to reach mass audiences with effective messages. In fact, TV commercials can be more valuable than ever because they drive online engagement efficiently.

Content carriers and providers need to operate like the co-dependent businesses that they are. Strategies to reduce commercial avoidance need to focus on the real causes. Targeting technologies need to improve the relevance of TV commercials. TV commercials need to contain interesting messages. The consumer is not the challenge, we are the challenge.

Perhaps a recession is what we need to get focused on the win/win solutions that are right in front of us.