Yesterday Veronis Suhler Stevenson and PQ Media released a report that predicts that internet or "alternative" ad spending will become the "leading ad medium", surpassing newspapers by 2011. There were a number of interesting findings and projections in this report, such as huge expected growth in blog, podcast and RSS advertising; growth in advertising on so-called "pure-play" sites; record communications spending in 2006 and beyond; and a slight decline in time spent with media and the consumption patterns of audiences.
However, because I am primarily interested in television networks, one finding in particular peaked my interest. The report was that audiences are "migrating away" from ad-supported media, spent less 6.8% less time with this type of product (ie. networks, newspapers) in 2006 than they did in 2001, and more 19.8% more time with products they support directly (video games, and (I presume) subscription based Internet service), while overall media usage declined in the period by about half a percent in that period.
First, before anyone starts to panic, I think these numbers could be primarily a reflection of the trends that we've been observing in the marketplace over the last several years rather than a mass exodus from ad-supported media per se. MediaPost's article suggested that it was a decline in ad-supported vs. consumer-supported media, but it looks like this could actually be representing declining consumption of traditional media, like network TV and newspapers, and increasing consumption, which happens to be ad-supported of so-called "new" media, much of which is on a subscription or purchase model. It's hard to say without more data, but it's a possibility.
Also, the categorization is unclear. Yes, newspapers sell ads, but they also charge for hard copies. Many websites are ad-supported, so "Internet" doesn't tell us much about what types of media property are going into those figures.
And the news in the study isn't even all bad for traditional media companies. Spending on the web sites of these well-established brands "is growing faster than the pure-plays", according to the VP of Research at PQ Media. So, perhaps, if done right, online advertising could replace lost on-air revenue. Could it be that digital distribution will retain yet another feature of television, the commercial break? Maybe a shorter one, but there is clearly interest among advertisers in affiliating themselves with known media brands, .
But, let's pretend for a moment that audiences are really just not into ad-supported media and want to move to a more subscription-based, purchase-oriented media environment, as the Media Post article suggests. What's a network to do? Unable to move to a subscription model on television, like a cable channel, ad-supported broadcast might be necessary on television, but online? Some primetime series seem to barely break even on their ad revenues as it is because of their high production values and expensive talent. Taking away more ad revenue on air and online would make the current production model extremely risky to sustain. See some of the writing from C3 alum Ivan Askwith and C3 Director Henry Jenkins. Also, see posts in the past about alternate revenue models, from subscription VOD models for Long Tail archived content to new possibilities for the distribution of locality-specific films.
Perhaps, if consumers want to choose and pay for their television content online rather than watch ads, the production methods themselves may need to shift. Could networks create the televisual experience we've come to expect with less money upfront? Could they move to a new, compensation scheme for talent, a smaller base salary with a bigger payoff for the show's performance, to spread the costs over time rather than incurring them all at the beginning? Could identifying fans early on help the studio to establish a relationship with them that could lead to a more profitable entity through proselytism, or effectively making them investors in the some aspect of the franchise? Maybe.