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Does Cutting Back on TV Ads Equal Cutting Back on Ad Revenue?

November 28th, 2018   ||    by Melanie Brown

Viewers who use streaming platforms have become accustomed to fewer ads. Netflix, Hulu, and Amazon boast no ads, while other OTT platforms run limited ad inventory. As a result, the linear TV industry is taking note and planning ways to limit the disruptions of TV ads. TV advertisers are exploring alternative ad lengths and some networks are reducing ad loads.

According to Bloomberg, Fox is cutting its ad load on Sunday nights by up to 40 percent to stem the flow of lost viewership and to increase ratings. By 2020, the network group hopes to have its ad load down to two minutes per hour, notes the Los Angeles Times. NBCUniversal has pledged a similar reduction of 10 percent across its portfolio of networks in primetime programming.

But while these initiatives may entice viewers to keep watching linear TV, what does a lighter load of TV ads mean for advertisers and for ad revenue?

A Win for Advertisers?

Some in the industry believe reduced advertising time in linear TV programming is a good thing for advertisers. To that end, with a less crowded advertising landscape, brands should welcome the opportunity for increased visibility. The value for advertisers is coming in the form of alternative ad formats.

FOX has announced the launch of its new JAZ pods (a clever acronym for “Just A and Z”), which includes two 30-second spots per pod, reports MediaPost. Similarly, according to the Los Angeles Times, NBCU is offering advertisers the opportunity for 60-second spots that run by themselves in one-minute ad breaks.

Advertisers are eager to jump on the minute-long spots because of their increased marketing power. With less inventory available for sale, however, it’s imperative for advertisers to be more strategic about their media plans and to use new and richer data sources to help inform that strategy.

What About Revenue?

The question on the publisher side remains: Can the reduced ad time still bring in the same amount of revenue for networks and groups as usual?

While networks like FOX are now raising the costs of spots in the new JAZ pods by up to 40 percent, NBCU’s one-minute spots are also priced at a premium. The hope is to mitigate the effects of less time for TV ads. While the strategy is sound in theory, scarcity can only raise ad pricing so much.

Along with advertisers, publishers, too, need to embrace data-driven advertising to prevent revenue from continuing to dip.

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