Why you'll see fewer ads on NBC this fall

Hoda Kotb named permanent co-host of NBC's 'Today'?
Hoda Kotb named permanent co-host of NBC's 'Today'?

NBC is betting that viewers want to watch their favorite shows with fewer commercials — and that advertisers will come along for the ride.

The network announced this week that the total amount of time dedicated to commercials during its original prime time lineup will drop by 10% this fall.

NBCUniversal, owned by Comcast (CMCSA), has plenty of reasons to try a few tweaks. Younger viewers are abandoning traditional TV in favor of streaming services like Netflix, and advertisers are shifting dollars to digital, said Tim Calkins, a marketing professor at Northwestern University's Kellogg School of Management.

"It's an effort to address both of those issues," he said. "These big networks are under a lot of pressure."

NBCUniversal isn't the first company to experiment with something like this. TNT and TruTV have already cut back on commercials. (Their parent company, Time Warner (TWX), also owns CNN.)

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But the trend isn't all that popular within the industry. Brian Wieser, a senior advertising analyst at Pivotal Research Group, said some networks run as much as 20 minutes of commercials per hour of programming.

He said the soft market for TV advertisements means many networks have to increase the number of commercials to hit their revenue targets.

NBCUniversal is trying a different approach to the supply and demand problem: Reduce the supply of ad slots and increase the amount advertisers pay per commercial.

"I think there's no question that behind this move is a desire to increase prices, or at the very least, to maintain prices," Calkins said, calling it a "win-win situation for NBC."

"On the one hand, it's going to be better for viewers, and that is going to slow the viewership erosion," he said. "On the other side, it's going to give them leverage with advertisers."

The strategy is not just about cutting ad time. NBCUniversal is also rolling out a new 60-second ad slot that will air during the first or last break of a show. The company says up to two advertisers will be able to use that time for "fewer, better and more contextually relevant ads."

The company says it will air fewer commercials on more than 50 original prime time shows across its networks. The company's channels include Bravo, E!, SyFy and its flagship NBC broadcast network, which airs popular shows like "The Voice" and "This is Us."

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Some experts think NBC is fighting a losing battle. John Wirtz, an assistant professor of advertising at the University of Illinois at Urbana-Champaign, said he expects more online ad growth, citing options like pre-roll advertisements on YouTube videos and targeted searches.

Advertisers are trending toward digital. Online advertising sales surpassed TV last year, according to Magna, a company that monitors audience trends, Magna forecasts digital ad sales will hit $237 billion this year, and TV ad sales will hit $183 billion.

Wirtz was also skeptical of NBC's ability to draw more viewers with fewer advertisements.

Television networks have tinkered with ads a lot in the last several years, including with six-second commercials and the "double box," which is when a program and an ad are broadcast side-by-side.

But Wirtz said ads aren't the biggest reason people have changed their viewing habits — convenience is.

"Their expectations are different," he said of younger audiences who have flocked to platforms like Netflix and Hulu. "And one of their expectations is, 'I want it when I want it.'"

Wieser also said that he did not think fewer commercials would stem the ratings declines. But he said that wasn't the point.

"Network TV still reaches more people than any other medium," he said. "People who are hard to reach on TV also are generally hard to reach in digital media, too."

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