US consumers have been “cord-cutting” — or canceling their pay-TV subscriptions in favor of internet-delivered alternatives — since 2010. The number of pay-TV subscribers dropped a record 3.4% year-over-year (YoY) in 2017, and the rate of decline is expected to accelerate further in the coming years; consequently, pay-TV providers will continue to see their most important revenue stream erode. To compete in the shifting media landscape, traditional media companies' business strategies must satisfy two goals: extract as much revenue from pay-TV as possible before the opportunity to do so fizzles out, and taper reliance on pay-TV-related revenue along the way.
In a series of three notes, Business Insider Intelligence looks at how big media companies are refining their strategies to meet the aforementioned goals and mitigate the detrimental impacts of cord-cutting. In this third and final note, we will make the case for airing fewer commercials per broadcast hour, which could boost viewership for traditional media firms. The previous notes examined the ways companies are launching their own direct-to-consumer (DTC) streaming services to recuperate losses that stem from cord-cutting, and detailed the types of M&A deals that media companies are exploring to effectively compete with deep-pocketed streaming giants.
TV Commercials: Less Is More
BI IntelligenceConsumers are spending more time consuming media online. Globally, consumers spent an average of 212 minutes online per day in 2017, up 11% year-over-year (YoY), while time spent with linear TV fell 2% YoY to an average of 222 minutes per day, according to GroupM. This trend is expected to accelerate, and in 2018, time spent online will likely eclipse time spent on linear TV.
They're therefore becoming accustomed to ad-light and ad-free experiences. Netflix and Amazon Prime Video — the two leaders in SVOD — don't run ads. And YouTube — the world's largest online video site — is a pioneer in six-second pre-roll ads; it announced it would eradicate unskippable 30-second ads by 2018. Snapchat, which has been curating professionally produced, TV-like content, started running six-second [...]