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The End of TV Advertisements

TV broadcasters are meeting this week in Las Vegas to discuss their growing concern over cord-cutters and the resulting decline in advertisement revenue. It’s a meeting about five years too late — the horse has already left the barn.

This business model is dead.

The broadcasters will no doubt conclude the obvious: they need to make as much content as possible available online.

But where they’re going to fail is doubling down on paid advertisements.

Broadcasters need to accept that the glory days of charging upwards of millions of dollars for a 30-second advertisement spots are over.

As much as the whole DVR/time shifting revolution has been about watching TV when you want to watch it, it has also been about avoiding the ads. After TiVo debuted in 2000, it didn’t take people long to realize that if they started watching a one hour show currently being recorded fifteen minutes into it, you could fast-forward through all of the commercials and finish the show at its scheduled end time.

Here’s my prediction of the future: broadcasters are going to spend years futzing around with various ways to try and force people to watch advertisements with online content. While they’re stagnating their competitors who charge per episode or offer subscriptions will continue to innovate and surpass them.

At some point broadcasters are just going to have to accept that there is less money in TV than there used to be. And they’re also going to need to come to terms with the fact that they’re never going to be as large as they once where.

A lot of this reluctance to overhaul how they monetize content is driven by the fact that broadcasters are still producing as much content as they did before there was cable TV, making it difficult to pay for programming through charging viewers a fee.

They’re putting out three hours of primetime original programming a day, as well as a morning and late night shows (and not to mention that their TV seasons last 23 episodes).

This makes it impossible for one of the broadcast networks to sell an advertisement-free, unlimited view subscription for all of their programs — they’re producing so much content that the subscription fee would have to be huge to cover the costs of all the shows.

Essentially, what I’m arguing is that at this Vegas shindig the broadcasters need to begin preparing for a future where they produce much less content and profits are much more meager. And that this will all happen very soon.

While it seems implausible that such a huge change could happen so fast, look at the music industry. As soon as the sale of physical media began to decline the entire industry dramatically contracted.

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