M+E Daily

By Paul Sweeting

Americans started showing signs of falling out of the habit of watching television in 2012. Total viewing time was down 2% in the first quarter of the year, and declined 1% in the second, the first time total viewing has posted sequential quarterly declines since Nielsen started tracking it. Viewing was up just under 1% in the third quarter, but would have been down but for the Summer Olympics in August. The fourth quarter is shaping up as another downer.

That decline in total viewership has started to show up in the ratings for individual shows and networks, as well. Through the first four weeks of the fall TV seasons, Fox has seen a 25% drop in viewers; CBS has seen a 12% drop; and ABC has seen an 11% decline.

Those declines have led to more urgent calls by the networks to shift the industry to a live-plus-7 standard (known as C7) for reporting ratings that would count both live viewing and time-shifted viewing via DVR up to seven days after a show’s initial airing. The current industry standard is live-plus-3 (C3). But with DVR penetration now at 46% of U.S. households the networks argue that time-shifting behavior has become so entrenched that C3 undercounts the number of people who watch their shows and, at least to some extent, see the commercials.

Even shifting to a C7 standard may not help, however. According to data compiled by Nielsen and the Wall Street Journal, C7 viewership is down nearly as much as live viewership. THrough the first four weeks of the season, Fox’s C7 viewership is down 25%, the same decline it has experience in live and C3 viewing. CBS was down 10%, while ABC was down 7%. Only NBC has seen its C7 viewership go up this TV season, by 14%.

The total number of viewers who watch a show within the seven-day window is larger than the number who watch it live, of course, so the networks would get credit for more gross ratings under a C7 standard. But the data bely the argument that total viewing is not declining but merely being time-shifted. Even accounting for time-shifting, viewership is down.

What to do? BTIG Research analyst Rich Greenfield argues the networks should forget about DVRs and the debate over how long to make the ratings window and embrace VOD. Especially so since he thinks most people really do skip the ads during DVR playback, regardless of what they say in surveys:

Watching live television is no longer top of mind and watching commercials is laughed at.  Consumers have essentially been trained to avoid TV commercials, particularly given a heavy ad-load with no personalization/targeting.

• We realize all the studies show that consumers with DVRs still watch lots of commercials, but do you seriously believe any of that based on your own viewing behavior or anyone you know?
• Does anyone under the age of 25 even understand what it means to watch “live” outside of sports?

Instead of fighting over DVR viewing, Greenfield says the industry should essentially make all content available on demand, so it can be accessed by the growing number of connected devices people use to watch video, with fewer, but more targeted ads:

The problem is not “when” people choose to watch particular content, it is that they are not watching advertising at all when they watch that programming.  You can try boosting viewership via C7 or even C14, but the ads are simply not being watched.

• Trying to charge advertisers for ratings points that are not generating ad views is a non-starter.

What Should the Industry Do?  The TV industry must find a way to put a dramatically larger percentage of content on-demand, with targeted advertising and a lower ad-load.  Nobody will use a DVR if they can get to whatever they want, when they want it, where they want it, especially if the ad load is lighter and the ads relevant.  The DVR has always been an ugly workaround for VOD, yet the pace of innovation related to on-demand programming (TV Everywhere with targeted advertising) has simply been far too slow and we are being kind.

If Greenfield had a TV show the network would probably cancel it.