Want to watch a popular television show without all the ads? Your options are increasing. There’s the iTunes store, moving toward HD video formats, in which a growing range of shows can be bought on a per-episode or per-season basis, to be watched without advertisements on a growing range of devices at a time of your chooing. Or you could buy a Netflix subscription and Roku streaming box on top of your existing media expenditures, and stream many TV episodes directly over the web. Thirdly, there’s the growing market for DVDs or Blu-ray discs themselves, which are higher definition and particularly rewarding for those who are able to shell out for top-end home theater systems that can make the most of the added information in a disc as opposed to a broadcast. I’m sure there are yet more options for turning a willingness to pay into an ad-free viewing experience — video-on-demand over the pricey but by most accounts great FiOS service, perhaps? Finally, TiVo and other options like it reward those who can afford DVRs, and further reward those savvy enough to bother programming their remotes with the 30-second skip feature.
In any case, the growing popularity of these options and others like them pose a challenge, or at least a subtle shift in pricing incentives, for the makers of television content. Traditionally, content has been monetized by ads, where advertisers could be confident that the whole viewership of a given show would be tuned in for whatever was placed in the midst of an episode. Now, the wealthiest, best educated, most consumer electronics hungry segments of the television audience–among the most valuable viewers to advertisers–is able to absent itself from the ad viewing public.
This problem is worse than just losing some fraction of the audience: it’s about losing a particular fraction of the audience. If x percent of the audience skips the ads for the reasons mentioned in the first paragraph, then the remaining 100-x percent of the audience is the least tech-savvy, least consumer electronics acquistive part of the audience, by and large a much less attractive demographic for advertisers. (A converse version of this effect may be true for the online advertising market, where every viewer is in front of a web browser or relatively fancy phone, but I’m less confident of that because of the active interest in ad-blocking technologies. Maybe online ad viewers will be a middle slice, savvy enough to be online but not to block ads?)
What will this mean for TV? Here’s one scenario: Television bifurcates. Ad-supported TV goes after the audience that still watches ads, those toward the lower part of the socioeconomic spectrum. Ads for Walmart replace those for designer brands. The content of ad-supported TV itself trends toward options that cater to the ad-watching demographic. Meanwhile, high end TV emerges as an always ad-free medium supported by more direct revenue channels, with more and more of it coming along something like the HBO route. These shows are underwritten by, and ultimately directed to, the ad-skipping but high-income crowd. So there won’t be advertisers clamoring to attract the higher income viewers, as such, but those who invest in creating the shows in the first place will learn over time to cater to the interests and viewing habits of the elite.
Another scenario, that could play out in tandem with the first, is that there may be a strong appetite for a truly universal advertising medium, either because of the ease this creates for certain advertisers or because of the increasing revenue premium as such broad audiences become rarer and are bid up in value. In this case, you could imagine a Truman Show-esque effort to integrate advertising with the TV content. The ads would be unskippable because they wouldn’t exist or, put another way, would be the only thing on (some parts of) television.
