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Key Takeaways :
Jonathan Elliott: You've said that the 2020s will be remembered as a decade of massive change in the global media business. Can you explain what you meant by that?
Evan Shapiro: The entire media ecosystem is now built around the consumer and their habits. They are in complete control. There's this misperception that we're still at the end of the last era or that the streaming wars are the defining facet of the current era. But in reality, what most people saw as the beginning of the streaming wars when Disney went direct to consumers was the beginning of what you could call the user-centric era. Jeff Bezos predicted this 20 years ago when he wrote his famous mission statement for Amazon.
When you try to migrate the traditional television business to streaming, the implications for the advertising business are many and complex. You start with an ad-free product, and then you put advertising on it; the consumer doesn't mind. But that leads to a repeating acquire-and-cancel revolving door - what you could call a Churnapocalypse that I think most people believe only affects subscriptions.
Now, think about that. It's not just facilitating the death of the affiliate fee and the revenues from that; the advertising business is imploding because the reach is low.
Antenna put out a study that said that 33% of all new premium SVOD subscribers are "Serial Churners." People who sign up for something, watch something and then cancel. If one-third of your new audience and a huge percentage of your existing audience is just going to be absent, that means that every three or four months, 25% of your audience is gone. And it has to be replaced. There has to be a different approach to it.
The other thing is the role of the connected television. All video consumption is now racing towards the connected television. You're watching premium video, including YouTube. And don't forget that YouTube is now the largest television channel in the world, not just the largest video platform, which has been for some time, but it's now the biggest most-watched television channel on connected television. Performance marketing is leaving social media, and it's migrating with the eyeballs to the connected television.
And so, this year, with the Upfront [ad sales] being down and Scattering [unsold inventory] more important, the advertisers are moving away. You also have to remember this coincided with an eleven-month ad recession. Ad money is now coming back to a certain extent, but it's going to where it works. Efficacy, the proof of business outcomes, performance marketing, a return on marketing, spending, ad spend, and return-on-marketing investment are what counts. These are now the most important metrics that advertisers are using to buy their media, even on a brand campaign.
JE: How did we get to this situation?
ES: 2019 was the end of the last era. The following three years rushed consumers to these new outlets and these new platforms because they were at home and they had nothing else to do. And now, on the other side of that, the behaviors that were expressed during lockdown, that the media conglomerates thought would last forever, are now gone.
And in the wake of that, the entire television video ecosystem has been replaced by one that looks a lot more like YouTube. And a lot less like Netflix. Netflix is still a huge use case, don't get me wrong, but that's not the business everyone's chasing right now. Their ad business is not working dramatically. And so YouTube actually looks a lot more like where we're headed. And where we are. Because that's the use case. It has professional content and creator-led content married onto the same platform; it has the NFL; it has a cable product and a subscription product all wrapped into one.
If you look at how the average home uses YouTube, it's fascinating: some in the home use traditional YouTube products, a lot of them use YouTube Premium, a bunch of them use YouTube Kids, a bunch of them use YouTube TV, and a bunch of them use YouTube Music.
So you have the all of these products around this one service, you can't just look at YouTube usage, you have to look at a kind of YouTube continuum of products and how, in some territories, it's more than one human per home using YouTube on the Connected Television every single day. That makes it churn-proof. It is a suite of services. You're going to see Apple do very similar things with Apple One. Amazon is doing a tremendous job of this right now.
I also think you'll see Microsoft start to get into this as an enterprise as well, starting with gaming but then moving into television. Now that the Activision acquisition is complete, it makes sense for them to get into the television, they can buy Roku with the change in their couch cushions. They could buy Netflix, they could buy Paramount, they could buy Warner Brothers Discovery. Compare this to Disney. Disney's like selling off parts of themselves, like an old man in a bathrobe at a yard sale. Just to buy the rest of Hulu.
JE: You recently wrote, "Many of us are still buying and selling TV advertising like it's 2018." Can you explain what you mean by that?
ES: A lot of the use case on television is still Pay TV. Traditional Pay TV and broadcast wound into that Pay TV package. But 40% of it is streaming. Why do you have two different buyers buying streaming and traditional television? Doesn't make any sense. First of all, from a pure negotiating standpoint, it makes absolutely no sense.
But if you want to try to create an effective campaign and a measurably effective campaign, you buy them as a continuum. And you can. Spectrum will sell to you that way, and Comcast will sell to you that way. There is absolutely no reason why media buyers, agencies, and brands bifurcate their buying expertise across these two continuums. That makes no sense whatsoever, and you're doing both your clients and your own media buyers a disservice by doing it.
JE: What have been the big turning points in 2023 for you?
ES: This is the year we'll remember as one where we moved from a hearts-and-minds-first approach to media buying to a hearts-and-carts-first approach to media buying.
The fact that the advertising economy is bouncing back, but the Upfront [ad sales] are down is very telling. It means that money is moving out of big brands' forward-looking, long-term commitments and as much into scatter [unsold inventory] and performance marketing and return-on-marketing spending. Buyers are saying, "I want more flexibility. I want more accountability. I want more measurability. I want to understand that when I spend $1, what are the business outcomes I can expect on the other side of it?".
2022 was just a year in which everybody kind of held still, sheltered in place after an 11-month ad recession. 2021 was dominated by an irrational mindset saying: "This [media consumption] behavior is going to last forever; we're going to spend money everywhere." So that was wrong. 2023 will be remembered as the time when media buyers basically really held the platforms' feet to the fire, over efficacy, over return, over reach, not just for reach's sake, but cost per 1000 eyeballs. The questions are now, "What can I expect? What can I tell my client that they're going to see in sales based on this buy?".
JE: Can you say how media consumption and shopping are going to work together?
ES: More than a third of consumers under the age of 40 say they are shopping on their phones when they're watching television. What they're not doing is shopping based on what's on the television. Why would you not connect these two experiences? The behavior's already there. Retail media is actually now the fastest-growing segment of the advertising economy. Amazon will do $40 billion in ad sales this year, and almost 100% of that will be retail media. Walmart will do $3 billion in ad sales this year. Instacart will do a billion dollars in ad sales this year.
So you could talk about the media, the traditional media that buyers use. But there's this whole other segment. Three-quarters of brands now have a bespoke retail media budget that has nothing to do with the traditional media budget. And who gets that? Amazon. Who gets that? Meta, Walmart, and YouTube. Because they can show actions taken on the other side of that. And are basically saying "I don't care how many people I reach, if most people buy my product."
JE: How are we going to see gaming playing into media consumption?
ES: All the women in my household use the New York Times gaming app on a daily basis, a daily basis, not once in a while, not once a week, not a few times a month, every single day.
And so that's the kind of utility and the kind of loyalty and the kind of repetition that you can build a business around. These aren't shooter games. They're not even really expensive games; they're news quizzes, history quizzes, and word games.
There are 3.6 billion gamers on the planet Earth, and most of them are mobile gamers. Most of those mobile gamers are women aged 25 to 54. And more than half of the revenue in gaming comes from mobile gaming. And most of the revenue in mobile gaming comes from ads. So if you're a television publisher, and you have a good piece of intellectual property, and you're not investigating mobile gaming as an opportunity, you're really missing out.
If you want to know who the most important gamers in the world are, ask the New York Times, which has a massive gaming product that does incredibly well for them.
Evan Shapiro is an Emmy and Peabody-winning producer of TV, film, and podcasts. He is a professor of Media Studies at Fordham University and NYU. His charting of the media's evolution has made him known by some as the official unofficial cartographer of the Media Universe.
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