Yesterday ABC began implementing a new ad policy for its popular iPad app, which up to doubles the number of ads included per episode. ABC intends to apply the new ad policy to programs viewed on ABC.com soon as well. Albert Cheng, EVP, Digital Media for Disney/ABC Television briefed me on the changes last week, adding that he believes the new ad policy will become common in the industry. ABC also shared with me that its iPad app has been downloaded over 800,000 times, with 4.2 million episodes started since the iPad's launch on April 3rd.
The changes are very significant as they signal a new push by broadcast networks to improve the profitability of their free online and mobile streams. For example, a typical ABC.com program has included 5-6 ads that are 30-seconds, totaling up to 2 1/2-3 minutes of ad time. This compares with around 20 minutes of ads shown in an hour-long program broadcast on-air.
I have been vocal for a while now that broadcast networks need to increase their ad loads, not only to improve their online profitably, but also so that they can fully participate in the convergence between online and TV that is just ahead, driven by devices like Xbox, Google TV, Roku, etc. Note, I'm not advocating that online adopt a full on-air load - which it doesn't need to do because online ads are more effective - but rather that it target de facto economic parity between the two mediums. The CW Network announced recently that it planned to double its online ad load.
ABC has been in the forefront of driving the ad model, with Albert telling me a few months ago that ABC believed it was achieving "DVR economics" with its online-delivered programs. In fact ABC's research suggests no drop-off in recall or in purchase consideration when ad loads are doubled. Importantly, 90% of its respondents have said they prefer getting the show online for free with ads (regardless of how many), vs. paying. This is a finding that should temper any expectations Hulu might have about the potential of a long-rumored premium service. ABC's research echoes comScore's recent research which made many of the same points.
The increased ad load on ABC's iPad app is also important because it comes just on the heels of the iPad's launch, when users' expectations are still being formed. With tablet computers proliferating this year, they, along with smartphones, could prove to be yet another significant viewing platform.
While broadcast networks find themselves in an increasingly chaotic environment with new devices on which to view their programs being launched daily, their goal should be simple: to try to achieve economics that are as close to on-air as possible. Doing so immunizes broadcast networks' P&Ls against their viewers' decisions of where, when and how to consume the networks' programs. In this age of consumer empowerment, it is pointless to try to buck this trend; rather the emphasis should be on monetizing each view as effectively as possible.
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