September 26, 2016
Ashu Garg
At our third annual CMO Tech Tour, we discussed today’s best-in-class marketing practices and attempted to uncover tomorrow’s brightest MarTech innovations. And we continued a tradition of gathering insights from industry leaders—including the following conversation with Ann Sarnoff, President of BBC Worldwide North America.
Ashu Garg: You’re the longtime TV executive behind franchises like Rugrats at Nickelodeon and, more recentlyOrphan Black on BBC AMERICA. Tell us a little bit about some of the consumer shifts you’re seeing in TV and advertising.
Ann Sarnoff: TV—traditional TV—is definitely on the decline, but total video viewing is increasing on multiple devices. Traditional linear television is still a $170 billion business, $70 billion of which is advertising. To put that in perspective, Facebook’s video advertising revenue is about $2 billion. So, traditional TV is going to decline, and it’s already declining, but the technology and how it’s consumed is also shifting. It’s shifting to video consumption across multiple platforms. There are four dynamics in the market right now:
First, the technology is finally allowing the consumer to decide what they want, as opposed to programmers and cable companies deciding what consumers want. The consumers are now able to give immediate feedback through streaming and consumption of digital videos. That’s the good news.
Second, the content supply has increased dramatically. Those of us in the content business are figuring out what content those consumers want now that they have so many different choices. The number of dramas in the market have gone from about 200 per year to over 400 per year in the last five years. I don’t know about all of you, but my DVR is full of shows. I don’t have the time to watch all of them!
Third, viewing patterns have shifted. My husband was in the publishing business for many years, and when we would go out to dinner with friends they would ask him, “What book should I read?” Because a book is an 8-10 hour time commitment. Now people ask me, “What show should I watch?” And they’re not asking, what show should I watch tonight, they’re asking what show should I watch, period. “I’ve got all these shows stacked up on my DVR,” they’re saying, “and it’s a time investment because I’m going to binge them, and so I want to know from you, Ann, what should I watch?”
It’s a completely different mindset than what television viewing used to be. When I was at Nickelodeon and MTV Networks, it was all about destination viewing—going to a channel, sitting in front of it, and waiting for them to put the next show on. Now, it is all completely appointment viewing. You’ve got many different devices, many different means of consuming content.
The last piece is the measurement, and importantly, the monetization.
With all the fragmentation going on now, it’s becoming increasingly hard to monetize content.
Especially the very expensive content in the drama genre that more programmers are making because we know there’s demand for it. It’s not as obvious how that content gets monetized these days.
For example, linear channels get paid from something called a Nielsen C3 measurement, which measures how many people watch the commercials in the first three days after the content airs. So, you watch a program live or within the first three days, and then the programmer gets credit for those eyeballs and the marketer only pays for those “C3 eyeballs.”
But today, a lot of shows double their viewing a week later, because people didn’t have the time to watch it in the first three days. So advertisers know they’re getting more for their money than they’re paying for, but that’s the state of flux that the industry is in right now.
So, those are the four key trends. But if I was going to add a fifth, it would be the audience. I was really lucky in my career to have had a job at Nickelodeon when millennials were growing up, and one of my jobs was running the research department.
I knew from the get-go they were going to be a generation unlike any other generation, and I feel partly responsible. Nickelodeon was very much about empowering kids: unlike our big competitors, our mantra was to put kids first, we had a kids’ Bill of Rights, we never “talked down” to kids, etc. It was a little bit of an anti-parent thing, because we were the first 24/7 television channel for kids. The upshot is that millennials don’t consume media like the rest of us. They are the first generation of digital consumers and they’re now becoming adults who affect market consumption and dynamics. That’s been a big eye-opening trend in the business.
AG: The other thing that’s been a big change for media and entertainment more broadly has been the rise of social media. What role is that starting to play in how you think about both programming and advertising?
AS: Social media is a huge factor. In the last five years, it’s really upended the way traditional marketing in television is done. Certain shows are more viral and socially connected than others. We happen to have two big ones. One is the sci-fi series, Doctor Who. Doctor Who has a huge fan base that is deep and passionate, and that fan base lives on social media 24/7. They talk to each other, and they eagerly wait for news about the Doctor and the series.
A couple of years ago, we celebrated the 50th anniversary of Doctor Who – complete with a global simulcast special, so no matter where you were across the world, the special was premiering on a BBC branded channel in your community.
That global simulcast received a Guinness World Record in terms of viewership, and it really brought the global community together to celebrate the fandom of Doctor Who. Two nights later, we played the same episode in 3D format in over 650 theaters across the U.S., and we literally didn’t market it anywhere except for social media, and completely sold out. We grossed millions of dollars in one night, solely utilizing social media promotion.
So, the marketing paradigm completely shifts when you have a fan base that is passionate and connected/always on.
Those shows have many more opportunities to reach audiences now through social media. Some shows have nothing going on, no chatter whatsoever, and others like Doctor Who and Orphan Blackhave huge engaged fan bases online.
AG: Over the last decade or so, you’ve had a front-row seat of the disruption of the traditional networks by cable. And now we’re seeing video and online video lead the next wave of disruption. What do you think is going to happen to the business model of TV going forward?
AS: Back in the day, there were three, and then four, broadcast networks. Broadcast networks were all things for all people, and then cable TV came in with MTV for music and Nickelodeon for kids, and those niche offerings started to target specific genres and user groups. Over time they really disrupted broadcast television, eventually becoming, as a whole, bigger than broadcast – which was earth-shattering. What’s happening now is the second wave.
In April 2011, Netflix announced they were in over 20 million homes. The cable and satellite operators’ jaws literally dropped, because Netflix became bigger than Comcast, the largest cable or satellite company at the time.
The traditional operators had to start doing business differently fairly quickly, changing their approach towards digital rights.
Honestly, the traditional operators were on their back foot in terms of technology. For all those years, we (programmers) had been supplying them with on-demand programming. But as a consumer, you had to go to channel 1,000-whatever, to find the latest episode of Orphan Black…good luck trying to find it. It was buried, and they didn’t market it.
So they could’ve created a Netflix-like offering in each of their systems. They had the pieces of that ecosystem, they just didn’t have the technology, and they didn’t have the user interface. They did have programming.
Over the last few years there’s been a race to catch up to Netflix. Now the cable and satellite companies are saying: “Watch it live or catch up the next day on your phone or laptop.” They really don’t want you to cut the cord. Everything’s evolved rapidly as a result of that shock to the system.
I think the next wave of disruption is the new set of competitors in the digital-only space, which I’m calling the disruptors of the disruptors. Netflix, Hulu, and Amazon are currently the three big digital services, but you also have niche offerings like SeeSo in the comedy space, as well as Crunchyroll, DramaFever, and CuriosityStream. These narrow niche offerings are trying to do the same thing that cable did to broadcast 20 years earlier.
In fact, we’re launching an SVOD service this fall, so we’re getting into the over-the-top space as well.
AG: If you play this out a few years, how do you think this ecosystem will look five years from now, and what will happen to the business model of TV?
AS: Streaming will continue to grow, but the real question is, streaming by whom? Is it necessarily a third-party or digital service, or is it the traditional television linear networks that will be in the streaming game?
Dish launched Sling TV, which is a disruptor of themselves. It’s a skinny bundle, if you will. For $20, you can buy a select number of channels, including ESPN.
That brings up another factor: live-viewing. ESPN tends to be the calling card, because everybody wants to watch sports live.
I’ll give ourselves a plug, because we produce Dancing with the Stars for ABC, a format from a BBC show called Strictly Come Dancing. For the first night of the season 22 finale we had over 12 million live viewers. People do still watch some shows live – especially competition-based shows.
There’s this whole other question about the social aspect of watching live, of watching something as a community. In a completely distributed, fragmented world, you miss out on that conversation and that experience. I do believe event-based television will remain popular for a long time.
AG: That makes a lot of sense. Ann, let’s shift gears from your role as a media executive to your long-time status as a marketer across the many other roles you’ve played. What do you think about marketing in this new world order?
AS: It’s so incredibly complicated, but there are tools these days that just weren’t there before: the whole “throw it at the wall, try to get somebody to notice your advertising three times” is now much more surgical.
There are so many platforms to market and advertise on it’s important to tailor the message to the platform. And data analytics are the key to understanding the ROI of each. I think managing social media in particular is an art. Companies who are good at it know that it’s not something you can force. Back to the Doctor Who fan base: we can’t tell them what to do. We can seed the conversation, give them tidbits, sneak peaks, etc., and then you let them have the conversation.
Especially millennials. Millennials do not want to be told what to do.
Your approach to them has to be authentic, and the conversation has to come from them. If they feel a big media company is imposing something on them, they will run fast in the other direction.
AG: It’s not just millennials. I have a five-year-old. He doesn’t want to be told what to do either!
We have a lot of startups in the room here, and a lot of startup marketers who don’t necessarily have big budgets, aren’t necessarily thinking about TV or even video as part of their marketing mix. What advice do you have for these marketers?
AS: First, segment your audience and then get to know them. When I was at Nickelodeon, we had 200 focus groups a year to get to know who our audience was – what they watch, how they think, what products they like.
One of the things we’re hardwired to get in trouble with is assuming we know our audience or extrapolating our own thoughts onto our audience. With kids you can’t do that, because you’re no longer a kid. So you actually have to study and listen to them in a different way than your adult frame of reference. My Nickelodeon experience made me very mindful of the importance of knowing your audience as objectively as you can. That understanding helped us make better shows and taught us how to talk to kids. The “Insights” people have become more important in corporations because they are holding the Holy Grail, which is the knowledge and understanding of the end user and the audience. In my experience, that usually leads to business success.
My final piece of advice: know your target audience and know it well. Figure out who the center of the concentric circle is because they are your core and can then be your emissaries to help create buzz which catalyzes the outer layers of the concentric circle. Those are the techniques we’ve always used: knowing the segments of the audience and what programs and messages are going to resonate with each.
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Ann Sarnoff is the President of BBC Worldwide North America, where she is responsible for the growth and success of all of the BBC’s business divisions in the U.S. and Canada. Before joining BBC Worldwide, Sarnoff worked at Dow Jones & Company, where, as president of Dow Jones Ventures, she launched The Wall Street Journal’s executive conference business and FINS.com. Before Dow Jones, Sarnoff was the COO for the WNBA. She has also held positions at Viacom, VH1, CMT, MTV Networks, and Nickelodeon.
This conversation has been edited for clarity and length.