STILL GLUED TO THE TUBE?  DIGITAL CHANNELS NOW PERFORM BETTER THAN TRADITIONAL TV ON AUDIENCE REACH AND OTHER TRAITS THAT MATTER MOST TO ADVERTISERS

New Bain & Company research estimates the TV industry risks leaving $10 billion to $20 billion on the table by failing to keep pace with digital competitors

New York – July 8, 2015 – The media industry has long suspected that traditional TV's reign would be cut short by the next wave of media technology, so it comes as no surprise that TV's unquestioned dominance of the industry landscape now appears to be at risk, due largely to pressure from digital media platforms.  Bain & Company's most recent research on marketing trends, Will the Ad Revolution Be Televised?, finds that marketers now say television performs worse than digital in the areas they care most about, including targeting, measurement, engagement and TV's once unassailable area of superiority: audience reach.  If the TV industry fails to respond to the digital threat, Bain predicts it will leave $10 billion to $20 billion on the table across the entire traditional TV advertising ecosystem in the next three to five years.

Digital platforms are reaching a tipping point where scale and quality are comparable to traditional TV, and major advertisers are responding accordingly, with some shifting dollars away from TV faster than previously thought. Bain's research marks the first time that fewer marketers included TV when asked about which types of media comprise their five largest advertising channels: 57% of respondents currently include TV in their top five, but that number drops to 50% when asked about their outlook three years out -- with one national U.S. brand saying it spent zero dollars on TV in 2014 and plans to spend even more on digital in 2015.

"Traditional TV and digital are now battling for ad dollars on a surprisingly even playing field," said Charlie Kim, who heads Bain's Media Practice in the Americas and co-authored the report.  "Advertisers view digital platforms as a substitute, rather than a compliment, to traditional TV, which should worry TV executives, especially since live TV viewership is also in a steady freefall."

While Bain acknowledges that the TV industry is responding to this shake-up with new partnerships, data platforms and targeting tools, more can and should be done to close the gap with digital.  In addition to content providers and distributors putting aside their historically contentious relationships and joining forces to confront the digital threat, Bain offers four "no-regret" moves that will enable traditional TV advertising to remain competitive for years to come:

1. Anticipate and deliver against marketers' rapidly changing needs – As marketers' preferences about what and how to buy shift, it will become more important than ever for the TV industry to understand the latest marketer trends and behaviors.  Further, they must transform their sales and go-to-market models accordingly so that they can start winning their fair share of battles against digital competitors—not only in sales pitches but also in public relations.
2. Generate proprietary audience insights to improve address-ability of current TV ad inventory – For networks, this means engaging with partners to build a robust data set based on viewer demographics, habits and preferences.  An important first step for distributors is determining how to share enhanced customer data with other players in the TV advertising ecosystem.
3. Invest now in the next-generation ad platform – Content providers should continue to develop ad-serving capabilities and real-time bidding platforms for their traditional TV advertising inventory as a way to stay relevant as a primary provider to the marketing ecosystem.
4. Collaborate with natural allies and traditional adversaries – Networks and distributors may need to rethink their partnership strategies and consider collaborating on more issues:

• Networks should consider actively teaming up with other networks to pool inventory, build scale and build more robust TV advertising platforms
• Distributors could also build scale by partnering with other cable companies as well as satellite and telecom media providers
• Networks and distributors should also consider forming partnerships together, which will allow them to compete more effectively with digital alternatives

"Collaboration across the entire TV ecosystem is going to be the game changer for traditional TV advertising from this point forward," said Danny Hong, a Bain partner in the firm's Media Practice and the report's co-author.  "There is no longer a strategic advantage to going it alone.  Any short-term friction will be vastly outweighed by big returns in the long term and a greater competitive advantage on par with or ahead of digital."

Editor's note: To arrange an interview with Mr. Kim and Mr. Hong, contact:  Dan Pinkney at dan.pinkney@bain.com or +1 646 562 8102

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