TV buyers need an updated toolkit for post-Covid viewing habits

Opinion: Strategy Leaders

Saturation and economic factors are limiting investment and increase competition. TV buyers must consider additional audience research and varied channel mixes, writes VCCP Media’s AV director.

We are living in a golden age of TV, with an all-time high in quantity and quality. TV screens are larger, more powerful, and more embedded in our lives than ever before. The meaning of the word “TV” has evolved for creators, viewers and advertisers alike. But this excitement is somewhat tempered in media buying circles.

TV has seen a staggering increase in investment over the past 10 years. Netflix arrived in the UK in 2012 and debuted its first original content in 2013 with House of Cards. Four years later, Amazon bought the rights to The Lord of the Rings, committing to producing five seasons at a cost of £1bn. Disney launched Disney+ in 2019 and began distributing theatrical releases at home, an unthinkable move 10 years ago. The traditional broadcasters have also invested, with the BBC focusing on iPlayer, and Channel 4’s platform changing from 4OD to All4 and now simply Channel 4. The launch of ITVX at the end of 2022 represented the single largest investment by any of these broadcasters to date. This is alongside the eye-watering investment in EPL and Champions League football from Comcast’s Sky and Warner Bros Discovery’s BT Sport.

But how sustainable is this investment? The supply of content has increased, but demand has a ceiling. What happens when the market reaches saturation point, if it hasn’t already?

Streaming is no longer a USP. Now what?

To try and predict what we think will happen next, we need to consider what brought the UK to this point. The foundation for streaming’s growth lies with broadband speeds, which have increased while costs have fallen. This opened up the market to eye-watering content investment from Netflix and Amazon, improving the quantity of output but also quality, attracting Hollywood talent. And UK household economics played a crucial role in the rise in subscriptions as £9.99 per month represented huge value compared to DVD sales and cinema trips. Covid accelerated this with an influx of hours spent at home.

Each of these factors is now set to limit TV investment. Streaming is no longer a USP as traditional broadcasters now have the same technology, and faster broadband is almost universal. The SVOD market is almost at saturation point in the UK; market leader Netflix has possibly peaked, as evidenced by the introduction of its AVOD tier alongside password sharing crackdown. And once the ceiling has been reached, other SVOD businesses may well spy more opportunity outside of the UK. And lastly, the cost of living crisis rewinds the clock and boosts the attractiveness of ad-funded services.

Slowing SVOD growth may be good news for commercial TV, but their impact on the landscape is likely permanent. Audiences are no longer bound to the EPG, with time-shifted recordings, catch-up, and live streaming all available. Thus the total viewing time and audience volume may be steady, but the proportion spent with advertising has taken a hit as SVOD makes inroads. The TV advert’s attention power is intact, but the instant scale available to that placement is not what it was a decade ago (there are plenty of examples of huge simultaneous audiences for ad-supported TV content in recent years, but the fact remains that there were more of these available 10 years ago).

TV buyers need to map this new landscape quickly. Reach-orientated plans need to run across ITV1, C4SH, Five, Sky Sports, C4 Streaming, ITVX, Sky video-on-demand (VOD), YouTube, Prime/FreeVee, to name a few. This is before Netflix reaches a significant ad-tier user base and Disney+ introduces ads, not to mention the other ad-funded VOD (AVOD) and free ad-supported TV (FAST) platforms!

TV conversations are no longer tied to 9 pm Sunday night dramas but fuelled by all of the above providers in unscheduled appointments. Just look at Channel 4’s Gogglebox‘s weekly slate; ITV, C4, and BBC programmes dominated the first series, but these channels now share the podium alongside Disney, Apple, Netflix, Amazon, and Paramount. TV buyers need to interrogate additional audience research, not just TVRs, to identify the optimal channel mix.

UK TV can benefit from global consolidation

In the next few years, audiences could settle on a simpler portfolio. The UK’s Big Three TV sales houses — Sky Media, ITV, and Channel 4 — could stand to benefit from a slowdown in US streaming investment. And we’re already seeing signs of consolidation in the streaming sector, as Sky’s consumer business works closely with Netflix and Paramount+. FAST platforms could struggle to land a user base in the UK when up against the BBC, ITV, and C4’s free streaming platforms. Encouragingly, ITV has prioritised their streaming platform and taken on the US competition directly with a much-improved UX and library.

Amid all of the above change, buyers and suppliers must demonstrate increased flexibility to continue getting the best from our much-loved channel. Buyers can sharpen up buying tactics, such as buying the 2am US premiere rather than the 9 pm UK premiere, accessing the larger consolidated audience, while buying box sets or Love Island via VOD are much more affordable routes to the type of audiences tuning in to event TV series.

Broadcasters can rethink broadcaster VOD buying routes; lower cost-per-thousand packages for ‘lean-back’ TV could replicate the equivalent linear environments, while continued investment in targeting capabilities will ensure the broadcasters compete with Amazon and Google in this space. Similarly, Netflix is the market leader now, but it needs to commercialise fast — better targeting and more flexible buying routes will attract more ad spend while they are top of the pile.

Sam Oates is AV director at media agency VCCP Media

Strategy Leaders: The Media Leader‘s weekly bulletin with thought leadership, news and analysis dedicated to excellence in commercial media strategy.
Sign up for free to ensure you stay up to date every Thursday.