How Unbundling Content And Audiences Will Negatively Impact Advertisers

John Piccone

Originally posted in MediaPost

As a reaction to the news last week that HBO and CBS plan to offer direct-to-consumer subscription models, Joe Marchese does a great job in last week’s Online Spin explaining the impact of the cable bundle. In short, he argues that a la carte pricing for TV content may in the end be more expensive for consumers than the traditional cable subscription model today, and could potentially decrease the quality of programming.

While reading his post, I was struck by the similarities between content bundling for consumers and advertising bundling practices that exist today in linear TV. For years the two have been joined at the hip, and it is dangerous to ignore the profound impact any dismantling of the current content bundle will have on advertisers’ fundamental use of TV: mass awareness and consideration for their products and services.

For decades, TV buyers and sellers have bought and sold TV advertising by placing premium (and expensive) content at the center of the bullseye of value. The value proposition of attracting the masses through entertaining content and inserting one or more advertiser messages had a dramatic impact on advertisers sales, broadly speaking (or else they would not have come back).

Over the years, the dynamic of content attracting audiences and those audiences being sought by advertisers grew to the point where more content (and distribution) was needed to satisfy both content and advertiser demand. In the sky and underground, satellites and cables delivered more and more diverse programming to more and more Americans. It came with a cost, but not at a level where the value and choice of entertainment was not worth it. And whether audiences realized it or not, this cost went back into creating more content that, in some cases, is proving to be so good that one could argue it is having an impact on theatrical sales. But this is a subject for another day.

Of course, nothing happens in a vacuum. Due to the amount of choice available, audiences began to fragment. As a result, advertisers could no longer accumulate the masses as easily as they once could on broadcast networks only. To re-aggregate audiences, sellers of both cable and broadcast began to bundle programming that attracted similar audiences and thereby, with delivery guarantees, satisfied increasing advertiser demand. And so the flywheel goes: more programming = more audiences = more advertisers = more sales for advertisers = more revenue for TV sellers.

So now that there’s a renewed attack on the cable bundle, let’s not forget that this also attacks the audience bundle. With the audience bundle that advertisers have relied upon to sell their products in jeopardy, advertisers also face an attack on their business.

We cannot forget the plain and simple truths about TV. First, it is the only platform that aggregates all of America. Second, if you want Americans to consider your product (search for it online), they usually need to hear about it on TV. And lastly, from a media efficiency perspective, advertisers only pay for the target audience reached. The non-target audience reach is free. That’s a pricing model that no other medium can match.

Advertising on television will continue to optimize organically. Buyers and sellers will invest in distinct capabilities that support mass reach objectives such as addressability, localized delivery, tighter audience targeting – and now, if defined correctly, programmatic tactics. But the core advertising principles of broad awareness and consideration that TV uniquely delivers cannot be forgotten. And today’s content and advertising bundling are the most efficient means to that end.

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