In “The Hulu Effect at Fox TV? Less is More in TV Advertising” last December, I observed that Fox television appeared to be following the lead of online video services like Hulu in running fewer ads per show. By having shorter commercial breaks — and communicating at the outset that the program would, for example, “return in 60 seconds” — the network hoped viewers would sit through the ads rather than changing channels, zapping past the commercials, or just walking away.
Comcast, which along with Time Warner plans to go online with some of its cable programming, apparently has a different view. According to the Wall Street Journal, Comcast plans to include the same complement of ads online as when the programs are originally broadcast.
Andy Heller, vice chairman of Time Warner’s Turner Broadcasting, is quoted as saying, “We spend billions of dollars buying and making these programs. And if we give this stuff to consumers for free with limited ads, it’ll go away.”
Television programs on Hulu, the free alternative to these cable-subscription services, typically contain less advertising than when they are shown on broadcast television. According to Jean-Paul Colaco, senior vice president of advertising at Hulu, the company has no immediate plans to change this scheme. The Journal states that “Mr. Colaco says Hulu’s focus is on increasing the effectiveness of ads and the amount of revenue they produce, rather than increasing their number.”
The issue, then, is one of quality versus quantity. If online commercials prove to be more effective than their broadcast counterparts, networks can run fewer ads per program. In theory this should be the case. Online ads can be targeted more narrowly and measured more accurately. And, of course, they can’t be skipped over as can the ads in recorded TV programs. Because of this, as the Journal piece points out, web ads typically command higher advertising rates per view.
The networks and cable companies are reluctant to leave money on the table, however. They are concerned, in the now famous words of NBC Universal president and CEO Jeff Zucker, about “trading analog dollars for digital pennies.”
While individual ad spots may command a higher CPM (cost per thousand views), the overall revenue-generating power of online content remains to be demonstrated. Until online programming can prove its ability to generate revenue on a par with conventional distribution methods, expect the traditional media to be reluctant to change the rules of the game as they move their content online.