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CHAPTER III - Pervasive Connectivity and Fragmented Attention Threaten Traditional Models

The broadcast and MVPD industries have operated on the assumption that viewers are physically stationary and that their attention is devoted to one screen. This makes selling ads relatively easy. Today, however, broadcasters’ practice of selling ads to support program development and profitability is becoming more problematic as people’s attention migrates to other platforms. For MVPDs, subscription growth has been tepid and traditional cable providers have lost market share to direct-broadcast satellite (DBS) and telephone companies. The strong forces tearing at traditional models fall into two closely related categories: attention and time.

With respect to attention, Kleiner Perkins analyst Mary Meeker has pointed out that people’s attention is migrating away from traditional media to devices whose main purpose is to connect to the Internet. Meeker’s analysis contrasts people’s time-use patterns next to advertising spending and finds gaps that are not likely to spark optimism in the traditional media business. People spend 42 percent of their time with media on television, where 43 percent of advertising dollars go. However, they spend 6 percent of their time on print media today, even though 23 percent of ad spending is on print. For the Internet—and for mobile especially—the gaps suggest a shift in ad spending is in the offing. Some 26 percent of people’s media time is devoted to the Internet, while 22 percent of ad spending is. For mobile, just 3 percent of ad dollars are spent there, while 12 percent of people’s media time is on their mobile devices.

Trends in shipments of mobile devices show that people are more likely to spend more time accessing video and other online content from them in the future. In just three years since their introduction, shipments for tablet computers have surpassed those for desktop computers and notebooks, according to fourth-quarter 2012 data. In terms of consumer adoption, more than half of Americans have smartphones (56 percent according to 2013 Pew data) and more than one-third (34 percent) have tablet computers. With the proliferation of devices, some 60 percent of Americans access the Internet on a mobile device.

The growth of mobile, coming on top of a decade of growing Internet use and adoption of high-speed Internet at home, gives people more choices than just passively watching a large screen. Analysis of Americans’ time use shows that, over the 2003 to 2011 time horizon, about one-third of the time people spend online comes from leisure time—and half of that comes out of watching TV or other video. Overall, prime-time TV viewing has been flat since the 1990s, but it has also shifted in composition. Broadcast TV viewership has fallen from shares in the 40 percent range in the early 1990s to about 25 percent in the late 2000s. At the same time, ad-supported basic cable has grown from a 10 percent share in the early 1990s to 36 percent by 2009. From these figures, though apparently good news for cable, it is clear that broadcast television has already suffered a decline in viewership that attracts advertising—and that cable will suffer the same fate, as individuals spend more time on mobile devices.

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