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Why no one is watching your ads

There's a war going on over the future of television, but not the one you think. The most visible TV battles are over carriage fees, which is the money the multiple system operators (MSOs) pay to programming networks -- usually on a per-household basis -- for the right to carry the station. Accusations of corporate greed are the grenades, and blackouts are the blitzes; viewers feel like helpless victims.

The most recent example of these public conflicts is Cablevision's 3 million subscribers being deprived of playoff baseball on Fox after a fee dispute got the company's stations pulled. Two years ago, Viacom went so far as to run a crawl on SpongeBob telling kids Nickelodeon was going to leave them if their parents didn't make the bad cable company listen. But carriage fees are the battle, not the war. Battles are about taking ground, whereas wars are about ideas and the fundamental shifts in power. While this looks like a fight between corporate titans, in reality the audience fired the first shot.

Abandonment of the advertising grid

More and more Americans are going off the advertising grid, using time shifting on the DVR, streaming programming online or to their TV, watching on mobile devices or off DVDs. As a result, it's increasingly difficult for ad-supported networks to pay their bills on ad dollars alone. This past spring, the news from the network upfronts told a positive story: $18 billion in ad commitments, a 20 percent year-on-year increase. While that's impressive growth, after many years of decline, the industry is still fragile. The fight for greater carriage fees (also known as retransmission fees) today is laying the groundwork for a tomorrow in which the structure that funds programming with advertising crumbles for good.

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The cable networks, on the other hand, are starting to see cord-cutting go from an executive's bad dream to a waking nightmare. Just last month, Comcast revealed that it lost 275,000 subscribers in Q3 and 600,000 over the first three quarters of 2011. You can bet it doesn't want to raise prices, as increased payouts to networks would require, since that could speed cord-cutting.

Opt-outs versus on-demanders

In partnership with the IPG Media Lab, comScore, and TRU, SAY Media recently performed a study of two groups of viewers who have made themselves particularly hard for advertisers to reach through the interruptive ad model. "Opt-outs" watched no live TV in the test period while streaming an average of at least 4 hours of video content a week. This group includes cord-cutters, though 90 percent of them own televisions. The "on-demanders," in contrast, still watch live TV, but they watch more time-shifted and streaming and less live TV now than they did a year ago.

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By Matt Rosenberg is VP of solutions at SAY Media.

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