The Monday Morning Quarterback

The New Reality: Homes Without TV

Suddenly advertisers have to contend with the idea that their messages aren’t getting through – worse, they aren’t even being received.

That’s because a growing number of U.S. residences have given up on the 500-channel universe and don’t want to pay big cable or satellite bills. They don’t even take signals free from the air via antenna.

And there’s a name for these 5 million households: Nielsen Co. calls them “Zero TV” households. Sure, they watch TV – but now it’s via the Internet, and sometimes through cellphone connections.

There’s the problem for advertisers. Though there are opportunities for ad placement, on web sites and apps of the video providers, these non-traditional formats can be confusing and even difficult for advertisers to access.

Online video subscriptions from Netflix and Amazon – two of the most popular video resources – cost less than $15 a month combined. There is some first-run programming (a long-awaited new season of “Arrested Development” is coming next month) but mostly it’s made up of recent movies and back episodes of popular TV programs that viewers missed the first time around.

In a quarterly report issued last month, Nielsen began to take notice of the “Zero TV” category. The company plans to begin measuring their viewing in detail starting this fall, with an eye toward incorporating the results in the formula used to calculate ad rates.

The “Zero TV” segment is increasingly important, because the number of people signing up for cable and satellite TV service has slowed.

Last year, cable, satellite and telecoms providers added just 46,000 video customers collectively, according to research firm SNL Kagan. That is tiny when compared to the 974,000 new households created last year. While the American viewing market is still 100.4 million homes (or 84.7% of all households) that total is down from a peak of 87.3% just two years ago.

Nielsen’s study suggests that this new group may have left cable, satellite and antenna TV for good. While three-quarters actually have a physical TV set, only 18% of the “Zero TV” viewers are interested in hooking it up through cable, satellite or antenna.

“Zero TV” viewers tend to be from the most sought-after target demo. They are younger, single, affluent and without children. There is no end of terms to describe them.

The TV industry now has a host of buzz words to describe these non-traditionalist viewers. There are “Cord-cutters” who stop paying for TV completely, and make do with online video and sometimes an antenna. There are “Cord-shavers” who reduce the number of channels they subscribe to, or the number of rooms pay TV is in, to save money.

Then there are the “Cord-nevers,” the fastest growing segment of “Zero TV” viewers, young people who move out on their own and never set up a landline phone connection or a TV subscription. They usually make do with a broadband Internet connection, a computer, a cellphone and possibly a TV set that is not hooked up the traditional way.

While the “Cord-nevers” are an important target market for advertisers, the growing category is also troubling because they are so sheltered. As more and more young people are raised with the power of the Internet in their pocket, they are increasingly unaware that TV signals can be pulled from the air for free. They know Netflix, but not “free TV.” It’s not that they think cable, satellite and broadcast TV is old-fashioned, it’s that they don’t even know the choices exist!

So does that mean cable, satellite and broadcast TV is in trouble? There is reason to be concerned. TV is evolving and only now beginning to deal with the new reality. Audiences for traditional cable, satellite and broadcast TV have been fragmenting for some time now. A broadcast show can draw as few as 10 million viewers and still be considered a hit. Less than a decade ago, that number had to be north of 25 million. Except for national sporting events and award shows, those kinds of audiences don’t exist anymore, thanks to a plethora of viewing choices – and what Nielsen Co. officially recognizes as a growing population of TV viewers who have limited their choices by shutting off traditional TV entirely.

What this all means for advertisers is that sophisticated and thoughtful media-buying research and techniques have become much more important. The choices available to advertisers have exploded dramatically in just the past few years, making experienced and innovative media buying critical to the success of an advertiser’s campaign. The days of a simple multi-media approach (some TV, a little radio, a newspaper ad or two, and maybe a billboard) are gone. Finding appropriate audiences for advertiser’s messages is more of a technical science than ever before – and it’s one that only an experienced ad agency media buying department can accomplish.

So the next time you start up a campaign, be ready for a non-traditional approach. Otherwise your messages will do more than miss their mark – they simply will not be received.

– Art Reker, Account & Creative Executive