How digital is saving TV companies from extinction

caption
Adele’s “Carpool Karaoke” scored the most views on YouTube for CBS’s “Late Late Show with James Corden.”
source
CBS

Why would a late-night host on a major network potentially cannibalize his own ratings to conquer YouTube?

For James Corden, it was all about getting his name out to a new audience.

CBS’s “Late Late Show” made this clear with its most popular segment, “Carpool Karaoke.”

In it, Corden drives music’s biggest stars around in a car while singing together on the artist’s biggest hits (and sometimes others’). In February, the show’s Adele segment became the most-watched video on YouTube.

“We wanted to make good content for television, but the thing we have least control over is ratings. The thing we have slightly more control over is relevance. The digital world is where you can make your relevance felt,” “Late Late Show” executive producer Rob Crabbe told Adweek.

This is just the tip of the iceberg when it comes to traditional TV companies taking a page out of the digital playbook. The stakes couldn’t be higher. Big shifts in viewership habits have been occurring right under their noses and now threaten their future viability.

The crisis for television companies is very real. The current “big four” are experiencing incremental decline in viewership year-over-year. Even more problematic is that their TV audiences are getting older and younger viewers are increasingly turning to alternative digital sources for entertainment.

A Nielsen study in October showed that in the last five years, there has been a 40% drop in traditional TV viewing by 18-to-24-year-olds. The time they previously dedicated to watching TV has moved to other activities and on multiple devices.

With that kind of wake-up call, it’s no wonder entertainment dinosaurs are either teaming up with digital partners or trying to create their own new digital universe.

Here’s a look a some of the biggest challenges traditional TV is facing and how they’re finding the solutions in the digital and online world – with a few notable exceptions:


Challenge: Millennials are watching traditional cable TV less, and many aren’t watching it at all.

caption
CBS’s “Big Bang Theory” is the most-watched show on TV.
source
CBS

While once the threat to traditional TV was cord-cutters, viewers who are canceling their cable TV and turning to digital, now there’s cord-nevers. These younger adults have never been cable customers and will probably never become ones. They’re watching TV online, through streaming services, and on multiple devices.

It’s become imperative that traditional TV find a way to get its content in front of this group. CBS is doing this through creating its own streaming TV service, CBS All Access. For between $5.99 and $9.99 (its non-commercial subscription), subscribers get every episode of current CBS series, many classic CBS shows, and at least 90% of the country can watch its live CBS feed.

CBS has a record of being the most-watched network on TV, but its audience skews older than the other three major networks. CBS All Access, though, is proving successful in being able to get its programming in front of younger audiences. Among the service’s one million subscribers, 30% are millennials (roughly 12-to-34-year-olds), according to a person with knowledge of the service who spoke with Business Insider.

Other TV networks offering their programming through a standalone subscription streaming service include HBO, Showtime, Starz, and Lifetime Movie Channel.


Challenge: Fans want TV when and where they want it.

caption
According to SymphonyAM, “Marvel’s Luke Cage” had the fourth-biggest premiere weekend among Netflix’s original shows.
source
Myles Aronowitz/Netflix

The whole concept of live viewing is dying. With the huge amount of television offerings today and a limited amount of time to watch them, viewers want their shows available according to their personal schedule.

Cable initially confronted that with DVR and On-Demand, but for viewers, limits remain on the availability of episodes and the ability to watch on different devices.

Streaming offerings like Netflix and CBS All Access are providing fans with more episodes of their favorite shows and availability across multiple devices.

Amazon Prime Video and Netflix then took that a step further by making content available for download to watch offline.

Plus, there’s a growing battle among DirecTV Now, Sling TV, PlayStation Vue, and soon YouTube to offer all the diversity of a cable subscription with a streaming product.


Challenge: Netflix and other subscription services have a wealth of data on their users, which gives them a leg up on programming decisions.

caption
“Wattpad Presents” raised youth viewership by 31% in its time slot for Philippines’ TV5.
source
VIVA Communications, Inc., TV5

Netflix is able to cull data from its subscribers regarding which programs viewers watch, and how. That gives Netflix a huge advantage over traditional TV when it comes to deciding what shows to produce, renew, or revive.

Traditional TV is beginning to bridge that gap via its own subscription services. For example, CBS All Access could see the viewing numbers for past seasons of “Star Trek.” That gave it the confidence to move forward and produce “Star Trek: Discovery,” the first TV show in the franchise in 11 years.

But there are other ways to get that data without turning to a subscription service. For example, Universal Cable Productions (UCP), NBC Universal’s production studio for cable shows, recently announced a partnership with Wattpad, the 10-year-old online home of original stories with a community of 45 million active writers and readers.

In April, the story site created Wattpad Studios with the goal of leveraging its talent and its user data to produce projects with entertainment companies.

“If I can be a bit brazen, we’re even one-upping Netflix in some cases,” Aron Levitz, who heads Wattpad Studios, told Business Insider of the richness of the company’s data.

“I mean, if you’re looking at existing streaming services, whatever they are, even existing TV, you’re looking at data on content that already exists,” he added. “We want to take that a level deeper, and that’s what we’re able to bring to our partners like UCP. We’re not only able to look at what’s trending and big, but to take trends we see off Wattpad and say, ‘What are stories that meet that trend?’ So, you’re actually able to combine data. Where the data of the streaming service may end, we can just continue it, find even more data, and be more successful for them.”

One of Wattpad’s first partnerships was with the major Filipino channel TV5, starting in 2014. The Philippines is Wattpad’s second-biggest market, the US being its first. Each week TV5 airs “Wattpad Presents,” in which a story directed at the teen demographic is produced into that week’s program.

“Almost solely on data, we look at the top stories in the country, take one up, and adapt it for TV,” Levitz explained.

“Wattpad Presents” helped TV5 raise its youth viewership in the time slot by 31%. Its two major competitors, ABS-CBN and GMA, saw just a 3% increase and a 2% decrease in teen viewership for the same time slot, respectively.


Challenge: It’s getting harder to capture viewers’ attention and hold on to it.

caption
“Blindspot” fell from NBC’s highest-rated show in 2015 to its second lowest-rated show currently.
source
NBC

Viewers are becoming increasingly finicky given the current overload of content, and TV is certainly feeling the consequences.

For example, last year’s breakout hit for NBC, “Blindspot,” was the Peacock network’s No. 1 highest-rated show. This year, it dropped to its second lowest-rated show on the network. Over at ABC, “Quantico” was the network’s highest-rated new drama and 11th highest-rated overall. Currently, the terrorism thriller starring TV’s first Indian lead is its lowest-rated show.

So networks are stressing over how to keep show audiences engaged so that they return season-to-season. Some have turned to developing complementary web series and intricate online fan sites to keep their shows in front of viewers even when they’re not airing.

Nicolas Cuneo, the CEO and cofounder of The Other Guys, is trying to help entertainment companies bridge the gap to not just the viewers they already have, but new audiences.

“Millennials right now are looking for new things,” Cuneo told Business Insider.

The Argentina-based production company is taking customization of TV to a whole new level. Borrowing from the gaming world, it’s banking on immersive experiences that allow viewers to choose where the story goes next.

“We want users to interact with the story, to be part of the story, and not to be only passive spectators,” Cuneo said. “All the new devices allow people to interact with the content, and we started experimenting with that, and we see that it really modifies and boosts the engagement with the content.”

Network executives, exhale. Like Wattpad, The Other Guys considers its content to be a complement to traditional TV rather than a replacement.

“We think there’s an opportunity in adapting the experience that you get from movies or a TV series and taking that experience to those free moments that you have during the day,” he said of the company’s shorter-length adventures.

“We see our content and our products as a complement to traditional television,” Cuneo added. “We can complement that with continuing engagement in different moments that the traditional content doesn’t get.”

What’s clear is that traditional television has to do something differently if it hopes to retain and grow its audience.


Challenge: Still, there are risks to jumping on-board the digital train.

caption
The first season of HBO’s “Westworld” is the most-watched of its original series, including the first seasons of “Game of Thrones” and “True Detective.”
source
John P. Johnson/HBO

All that said, the digital TV world is still relatively young and there are some risks to playing with the entertainment business model.

1. Advertisers are wary of the effectiveness of digital advertising.

Many advertisers, who provide the bulk of TV revenue, aren’t 100% sold on the impact of their commercials in the digital world. For them, live viewership is still the most certain they could be that their advertising is being watched and reaching a lot of people.

In fact, they aren’t wrong. A 2015 study conducted by marketing-analytics company Marketshare with Turner Broadcasting and Horizon Media showed that TV is still the most effective advertising medium.

“We’re not saying that digital is bad, but digital just can’t make up the reach that TV delivers,” Howard Shimmel, chief research officer at Turner Broadcasting, said.

2. The wariness is mutual. Young viewers have less tolerance for online advertising.

Millennials, the key audience TV networks are trying to capture by going digital, have less tolerance for online advertising. In fact, millennials comprise more than 40% of those who use ad blockers, according to data from marketing trend firm Invesp. They overwhelmingly find online advertising to be intrusive, annoying, and feel there’s too much of it.

The two factors above make for a challenging environment for networks that still make their money primarily off advertising revenue.

3. It still remains to be seen whether consumers find value in the streaming offerings from TV networks compared to the variety found on services like Netflix, Hulu, and Amazon Prime.

HBO Now, CBS All Access, and Showtime’s streaming services all claim to have about one million subscribers. That’s a drop in the bucket compared to Netflix’s 86 million subscribers. And with cable and satellite providers also getting into the streaming-service game, such as newest entry DirecTV Now, networks could be shooting themselves in the foot by trying to hoard their content on their own proprietary services instead of playing ball with the more inclusive offerings.