A recent report from eMarketer shows that video ads shown on TV are just as good as video ads shown with streaming content. In fact, people in Canada by far and away prefer to “pay” to watch TV and movies by viewing video ads compared to paying actual money in order to see ad-free content.
Ad agency executives were asked if video ads shown on TV were more, less or equally as effective as video ads shown with digital content. The majority said that they were just as effective. Although there were a smaller but significant number that said TV ads were more effective, they were about on par with those who stated that digital ads were the most effective.
This is likely due to a combination of factors, which include the greater targeting and lower costs of digital ads. Furthermore, the reach of digital video ads is already large and continues to increase:
In Canada, 78% of respondents said they preferred to watch mobile video for free, with ads, while just 15% wanted to pay for an ad-free subscription service. More than two in five respondents in Canada also said they were watching more video on their smartphone at the time of polling than they had a year previously.
This sounds like great news for advertisers, but for the TV industry, it’s in the ballpark of a death sentence.
TV is super serial expensive, and digital ads don’t pay those bills
The thing is, TV shows are super duper expensive to make. In fact, that’s part of the reason that reality shows have become so common in the last few years; no huge salaries to worry about or concerns about paying writers or worrying about the cost of special effects.
For TV shows on pay channels and subscriber services, the costs run about $4 to $6 million per episode. (Game of Thrones costs around $6 million per episode to make, but even House of Cards, which requires no CGI dragons so far as I know, still requires about $4 million to make.) On network TV, the costs are even higher. ABC’s Agent’s of SHIELD costs around $12 million per episode.
This is why there have been so many dustups in the last few years between cable TV providers and networks. Cable TV is struggling to keep their customer base, and higher prices are not a great way to do that. On the other hand, networks are fighting tooth and nail to pay for their shows, and ad dollars are dropping as money funnels from TV to digital ads. This leads to situations like the one in 2014 where Dish lost CNN and a variety of associated channels.
With digital video ads becoming more attractive and equally effective at a lower cost, it’s going to be harder and harder for TV shows to scrape together enough money to pay the bills.