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03.27.2006
Originally featured on BroadcastEngineering.com
TV advertising losing ground to Internet

According to a survey of 133 national advertisers conducted by the Association of National Advertisers and Forrester Research, 78 percent of respondents said television advertising is less effective than it was two years ago, the New York Times reported.

The future of television advertising was the main topic at a conference of the Association of National Advertisers in New York last week. It was a prelude to the upfront market in May, the time when television networks introduce new programming and companies reconsider the division of their advertising dollars among print, television, Internet and other media.

The problem for television advertising, the Times reported, is that many companies have begun devoting larger portions of their advertising budgets to the Internet, streaming video and even cell phone ads.

What's hurting traditional TV advertising, said Josh Bernoff, the vice president for devices, media and marketing at Forrester Research, is the digital video recorder. Though the device is currently in less than 10 percent of American households, that number is expected to hit “an indelible growth spurt,” Bernoff told the conference. He estimated that 43 million households were likely to have digital video recorders by 2010.

Despite a recent push by the four major television networks to present research minimizing the impact of DVRs, Bernoff said the ANA-Forrester study finds that advertisers don't believe it. Sixty percent of respondents said that with a DVR “tipping point” of 30 million homes, they would spend less on conventional TV ads than they do today. Nearly a quarter of them will slice their spending 25 percent when that happens.

Bernoff predicted the broadcast industry would see ad spending decline 5-10 percent beginning in the 2007 season. But he said that it would not be a fatal blow to television or the tip of the iceberg to future declines. TV will adapt.

Advertisers are looking to find alternatives to the traditional TV spots, with the survey finding 61 percent interested in branded entertainment within shows; 55 percent looking at TV program sponsorships; 45 percent looking at online video ads and 44 percent for product placement, Reuters<./i> reported.

Responding to the research was CBS research executive David Poltrack, who said that broadcasters would no longer count on ad income as in the past. He said that CBS is now selling cross-platform advertising, such as Internet ad space packaged with television commercials.

While acknowledging that the Internet is competition for broadcasters, Poltrack said that networks could take advantage of the growing popularity of streaming video. Through the NCAA college basketball tournament so far this year, CBS has hosted more than 14 million downloads of streamed video and had more than 4 million unique visitors, he said.

On other topics, some advertisers see over regulation by Congress and the FCC as a problem, the Times reported. The advertising industry has fallen under increased scrutiny by Congress, one speaker said, particularly for pharmaceutical and food advertising and product placement on television.

The implementation of à la carte cable programming, which would allow consumers to pay for only the individual channels they order, is also a concern for advertisers because it could decrease advertising revenue.

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