It happened at the Rio Olympics. The numbers were strikingly similar to Rio: Total viewership was down 34 percent, while video streams spiked 70 percent. Traditional companies, however, still need the scale that TV provides. It’s easy to see where Thompson thinks the future is headed: If sports can’t hold young people’s attention like they used to—as the Rio numbers suggest—then TV has a serious problem. For millennials, live events are just another story in the feed. Why watch the Olympics on TV when there’s Snapchat? The digital cold war Digital advertising is already beginning to overtake TV. Digital bundles, meanwhile, seem to be the focus of two of the biggest players in the space: YouTube and Hulu. Some advertisers, like digital-native companies, may gravitate toward data-driven direct-marketing platforms like Facebook. If there is a winner, it will be the platform that can provide scale, premium content, and powerful targeting all at once.
The cycle keeps repeating itself. A big TV event gets broadcast. Millions of people watch it. But then come the headlines: Numbers are down, again. They’re especially down among millennials, who now make up America’s largest generation. Network executives spin the news and make excuses, but behind closed doors, the thin smile they brave in front of reporters turns to a beset frown.
It happened at the Rio Olympics. NBC’s marquee event was, by many accounts, a “nightmare” for the network. Ratings dropped 15 percent from London 2012. The precipitous decline was driven almost entirely by one demographic: 18-34 year old adults, whose ratings were down an incredible 31 percent. The audience was the oldest since the 1960 Olympic Games, at an average of 52.
What’s troubling is the Olympics should be the perfect combination of TV’s biggest remaining strengths: it’s (sort of) live, it’s a sporting event, and it’s programming that no other network can come close to replicating.
So what happened?
Many millennials migrated to online streaming. NBC claimed that “‘more than half’ of the 50 million viewers who streamed its Rio coverage were under the age of 35. Some, sans cable subscriptions, simply tuned out.
A similar thing happened at this year’s MTV Video Music Awards (VMAs). Despite a preponderance of star power from Rihanna, Beyonce, and Kanye West—people I can anecdotally confirm young people love—the once meaningful event was a dud. The numbers were strikingly similar to Rio: Total viewership was down 34 percent, while video streams spiked 70 percent.
Meanwhile, NFL and Premier League ratings are both down this year—something that was once unthinkable.
Yet brands are still spending plenty of money on TV advertisements. In fact, in spite of the ratings catastrophe, the Rio Olympics were a huge moneymaker for NBC. It raked in $1.2 billion in ad sales, a 20 percent increase over London, according to Ad Age. In other words, the network is making more money on fewer viewers, which seems to run counter to the rules of advertising economics.
It’s an odd phenomenon, one that defies easy explanation. Some think TV stays afloat because of certain features that can’t be replicated. Namely, scale.
“There’s still nothing on Facebook that equates itself to the Super Bowl or a major live event,” said Steve Rubel, chief content strategist at the communications agency Edelman. “I don’t think digital video is being used as a reach mechanism yet, but TV at all levels is.”
Yet as Facebook continues to colonize most of the connected world under its blue banner, and digital giants like Snapchat and Netflix dominate millennial’s attention time, some think it’s only a matter of time before television’s dominance on ad spend comes to an end.
“It’s inevitable and already starting to occur,” said Rahul Chopra, CEO of NewsCorps social news agency Storyful. “There is not a TV executive today that is not worried if his or her audience is dying.”
The digital disruption
The potential migration of TV advertising to digital platforms gets to the core of what makes the internet such a transformative force for the business world.
There are a few characteristics that differentiate the internet from media platforms that came before it. Data collection is a huge one. Neither TV nor radio can even come close to gathering the kind of detailed demographic and behavioral data companies like Facebook offer.
Perhaps the biggest difference is the facilitation of direct relationships with consumers. In the past, brands could only reach consumers with expensive print and TV ads, which could do little more than promote brand awareness. Now, advertisers can be much more direct. With digital ads, consumers can subscribe to email mailing lists, click on ads, go to a product page, and so on.
Besides making direct marketing—and content marketing—a viable tactic, the internet has also allowed for the rise of e-commerce giants like Amazon, as well as smaller but still transformative direct-to-consumer businesses like Warby Parker, Glossier, and Dollar Shave Club. These companies typically eschew TV advertisements, relying instead on direct marketing like content marketing (Glossier, in particular, has perfected the method with its blog Into the Glossier)…
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