If you’ve been awake and in North America since January, you’re aware of the disaster that was Conan O’Brien’s Tonight Show and how his ratings compared to both Jay Leno’s prime-time talk show and David Letterman’s show on CBS. As it turns out, those two programs may not have been his biggest competition.
“One of the biggest competitions to a show that’s on at 11 o’clock is actually prime-time programming from earlier that evening,” says Pat McDonough, senior vice president of insights and analysis at Nielsen, the company behind television viewership ratings. “If we took it all as an aggregate, the time shifting in that period is bigger than any program in that time period.”
“Time shifting,” in this case, refers to prerecorded television watched later, either via DVR or online streaming. According to Nielsen, as much as 20% of prime-time network TV shows, such as House, American Idol, or Lost, is viewed after the original airdate. All of this leaves networks, advertisers, and ratings agencies scrambling to figure out who is really watching what—and when.
This has led to a new rating system, called either “C3” or “live-plus-three”; instead of only counting viewers who watch shows live, Nielsen counts anyone who records and plays back the program up to 3 days later. This captures more of the time-shifted viewing audience. By the end of 2010, McDonough says, Nielsen’s ratings will combine both DVR’d and online streaming content.
Kate Sirkin, executive vice president and global research director for Starcom MediaVest Group, sees the DVR, particularly the TiVo, as fundamentally changing the way Americans view television. “We have three in our house,” Sirkin says. “My 5-year-old doesn’t understand live TV; she’s always had a DVR.”
With that in mind, Sirkin says live-plus-three ratings strike the right balance between broadcasters, who want to capture as many late viewers in their ratings as they can, and advertisers, who want their commercial ratings to come out as soon as possible.
According to Sirkin, a January broadcast of American Idol drew in 4% of American households as it happened. That number grew to 10% by midnight and to 12% by 3 days later. Of course, as anyone who’s used a DVR, or even a VCR, knows, watching the show doesn’t mean you’re watching the commercials.
“The motivation is not to skip the ads,” Sirkin says. “That’s just an added benefit.”
For advertisers, though, this presents a completely different challenge. McDonough says that only about half of time-shifted commercials get watched, often only because the viewer forgets to press the fast-forward button. “I find it hard to believe that 50% of people are still watching,” says Mary Price, principal of the media team at Dallas-based advertising agency The Richards Group.
Price says the impact of the DVR is significant, but not the end of the game. Instead, she sees it as the latest step in a trend that stretches back to the widespread introduction of cable television. “Over the past 20 years, there’s been a huge shift in terms of fragmentation of viewing audiences,” Price says.
Fragmentation means that the viewership of most prime-time shows hasn’t changed so much as it has been spread across three different platforms: live TV, DVR, and online. As a result, advertisers and broadcasters have to change to keep up.
“I think what we’re going to see is a shift in the way that broadcasters and advertisers create and schedule advertising,” Sirkin says. Throughout 2010, some networks will be airing their online content exactly as it appears on television, longer commercial breaks and all. Other sites, such as Hulu, are experimenting with the length and quantity of commercial breaks or allowing users to pick which ads they want to watch. “When people are given a choice of what ad to see, they’re more likely to watch it and respond to it,” Sirkin adds.
The good thing about online content, from an advertiser’s point of view, is that it provides another medium on which to buy space. “The level and complexity of depth that goes into an online media buy is so much greater than an offline media buy,” Price says.
On the other hand, online ads offer so much more flexibility in terms of size, space, and content than do print or TV ads. They also offer immediate feedback and customization, whereas TV commercials take much longer to buy and much longer to show results.
“Data are easier to manage and manipulate on computers and set-top boxes than on live TV,” Sirkin says.
Once advertisers and broadcasters figure out how to monetize their online and recorded content, it may turn out that as the more things change, the more they will stay the same. “People still want to see good-quality television shows,” Sirkin says.