Marketing Jul 1, 2016

Hate Com­mer­cial Breaks? Here’s Why You Shouldn’t

There’s a hid­den val­ue to ads dur­ing TV shows.

Yevgenia Nayberg

Based on the research of

Song Yao

Yuxin Chen

Wenbo Wang

A famil­iar scene plays out in liv­ing rooms every night. You are absorbed in a TV show, when a jin­gle sig­nals the begin­ning of a com­mer­cial. To adver­tis­ers and tele­vi­sion chan­nels, the next few sec­onds are cru­cial: Do you see this as an oppor­tu­ni­ty to click to anoth­er chan­nel, or will you sit through the com­mer­cials? And if you leave the chan­nel, will you return after the com­mer­cials to con­tin­ue watch­ing your show?

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The chance to grab mil­lions of eye­balls dur­ing prime­time shows dri­ves mar­keters to pay big bucks for sec­onds of air­time, cre­at­ing a rich source of income for chan­nels. But to view­ers, com­mer­cials can feel like an annoyance.

The con­ven­tion­al wis­dom of TV com­mer­cials is that con­sumers pre­fer non-dis­rupt­ed view­ing,” says Song Yao, assis­tant pro­fes­sor of mar­ket­ing at the Kel­logg School.

This line of think­ing might seem obvi­ous to Net­flix binge-watch­ers. And it was the rea­son why the Chi­nese gov­ern­ment insti­tut­ed a pol­i­cy in 2012 that pro­hib­it­ed com­mer­cial breaks dur­ing a show, rel­e­gat­ing TV adver­tis­ing to slots between shows. The government’s goal was to make the view­ing expe­ri­ence more enjoyable.

When we learned about this pol­i­cy, we start­ed think­ing about whether remov­ing com­mer­cials is always good for view­ers,” Yao says. It seemed ambigu­ous. It real­ly depends on what you are watch­ing when the com­mer­cial starts.”

Might com­mer­cials dur­ing shows actu­al­ly have an upside for view­ers? After all, they do present a break in the action, which per­haps view­ers appreciate.

Nor­mal­ly, we might say nobody likes a com­mer­cial, which is true. But it has some ben­e­fits from the viewer’s perspective.”

Yao, along with Wen­bo Wang at the Hong Kong Uni­ver­si­ty of Sci­ence and Tech­nol­o­gy and Yux­in Chen at New York Uni­ver­si­ty Shang­hai, set out to under­stand how com­mer­cials dur­ing a show affect­ed TV chan­nel view­er­ship. Their results are rel­e­vant to any com­pa­ny that has to decide how to time the release of prod­ucts with­in a spe­cif­ic line, from video games to Lego sets.

Sud­den Ad Change

Pri­or to 2012, com­mer­cial breaks on Chi­nese TV chan­nels were sim­i­lar to those in the U.S. Ads could be broad­cast both dur­ing a show and between shows. With­in-show slots were more valu­able from the per­spec­tive of adver­tis­ers, since it was assumed that view­ers were more like­ly to sit through the com­mer­cials in order to see the remain­der of the show they had been watching.

The Chi­nese pol­i­cy, which banned com­mer­cials with­in a show but not between shows, went into effect with only 40 days’ notice. Tak­en by sur­prise, adver­tis­ers were unable to change their pro­gram­ming because the admin­is­tra­tive review process imposed by the author­i­ties took at least 50 days.

So at that time, the only behav­ior that could be affect­ed by the pol­i­cy change was that of the view­ers in response to the reduc­tion of com­mer­cial time,” Yao says.

What hap­pened once with­in-show ads were removed? Were view­ers actu­al­ly bet­ter off?

Researchers gath­ered a vari­ety of infor­ma­tion from a few weeks before until a few weeks after the pol­i­cy change. This includ­ed minute-by-minute prime­time rat­ings for the top 29 chan­nels in Bei­jing, as well as house­hold-lev­el data from more than 1,000 set-top meters that record­ed what chan­nel peo­ple were watch­ing at any par­tic­u­lar minute and, for each one-minute inter­val, whether the chan­nels were broad­cast­ing a spe­cif­ic show or a com­mer­cial (either between or with­in shows).

This allowed the researchers to con­duct a giant exper­i­ment in rooms across the coun­try. How like­ly were peo­ple to click their remote but­tons in response to two dis­tinct sit­u­a­tions — when com­mer­cials were pre­sent­ed with­in a TV show, and when shows ran ad-free?

Hid­den Perks

The researchers learned that remov­ing ads cre­at­ed a bet­ter view­ing expe­ri­ence only some of the time. It all depend­ed on what chan­nel view­ers began to watch when they first turned on the TV.

View­ers who set­tled into their couch and turned on a high­ly rat­ed chan­nel were less like­ly to click away to anoth­er chan­nel. So for these indi­vid­u­als, the loss of with­in-show com­mer­cials — and the click­ing-around oppor­tu­ni­ty those present — was not prob­lem­at­ic since they were hap­py with what they were watch­ing. In fact, they were most­ly bet­ter off because now they could enjoy a high­ly rat­ed show with­out com­mer­cial interruptions.

But if it was a poor­ly rat­ed chan­nel — or sim­ply one the view­er did not par­tic­u­lar­ly care for — drop­ping the ads posed a prob­lem. Find­ing some­thing bet­ter to watch was now cost­lier” for view­ers, since any time spent explor­ing alter­na­tives now meant miss­ing out on the ongo­ing show, even though it was one they were not that enthused about watch­ing. In the past, of course, they could have been explor­ing alter­na­tive chan­nels dur­ing with­in-show com­mer­cial breaks.

Nor­mal­ly, we might say nobody likes a com­mer­cial, which is true. But it has some ben­e­fits from the viewer’s per­spec­tive,” Yao says. It gives you this nat­ur­al oppor­tu­ni­ty to explore; oth­er­wise, you’re stuck with what you’re watching.”

Even among view­ers who did click away, the same over­all find­ings emerged. View­ers watch­ing a high-rat­ed chan­nel who clicked away dur­ing an in-show com­mer­cial were more like­ly to switch back to that chan­nel after the ad, com­pared with those who start­ed on a low-rat­ed chan­nel. Those view­ers were more like­ly to stay on the high-rat­ed chan­nel if they switched there dur­ing an ad break, aban­don­ing the low­er-rat­ed show.

Keep­ing an Eye on Com­peti­tors’ Timing

How can chan­nels use this knowl­edge of view­ing behav­ior to attract — or sim­ply retain — their audi­ences? Tim­ing ad breaks care­ful­ly based on what your com­peti­tors are doing is the key to suc­cess, Yao explains.

Low­er-rat­ed chan­nels should look to mim­ic their com­pe­ti­tion. If low­er-rat­ed chan­nels syn­chro­nized their ad breaks with high-rat­ed com­peti­tors, the incen­tive for view­ers to leave the low­er-rat­ed chan­nels would be low­er: no mat­ter which chan­nel they choose, they know they will only see commercials.

The oppo­site is true for high-rat­ed chan­nels. They should try to dif­fer­en­ti­ate them­selves from oth­ers, Yao says. If they air an excit­ing episode while a com­peti­tor is on an ad break, their chance of poach­ing view­ers is high­er. Mean­while, when they are air­ing an ad while their com­peti­tors are not, their view­ers are less like­ly to click away. Even if they do, they will come back after the ad ends.

It is a dynam­ic deci­sion that needs to be made depend­ing on what kind of show your com­peti­tor has rel­a­tive to the qual­i­ty of your show,” Yao says.

Breaks with Benefits

The results pro­vide guid­ance for the tim­ing of adver­tise­ments on oth­er plat­forms than tele­vi­sion, such as radio. But in a broad­er sense, the study has impli­ca­tions for any kind of a pause in the avail­abil­i­ty of a prod­uct, Yao explains.

For exam­ple, video-game man­u­fac­tur­ers might ben­e­fit if they syn­chro­nize the release of new games, Yao sug­gests. High­ly pop­u­lar series, such as Fall­out or Call of Duty, are like­ly to gar­ner more play­ers if they are released at sep­a­rate times, so a play­er can focus on one at a time.

For mobile apps and games, where devel­op­ers release upgrades or new fea­tures peri­od­i­cal­ly, care­ful­ly tim­ing the breaks between such releas­es could help keep their audi­ences inter­est­ed. You need to have a break so cus­tomers can learn to use new fea­tures or play new lev­els of a game,” Yao says. But if the break is too long, con­sumers may get bored and look for alter­na­tives. Both the tim­ing of a break and the length of the break are important.”

From Lego sets to the Thomas the Tank Engine series, the same prin­ci­ples could apply to the release of lines of non-vir­tu­al toys and games as well.

For now, how­ev­er, Yao and his col­leagues are focused on test­ing their the­o­ry on Chi­nese TV chan­nels. They are work­ing with net­works to strate­gi­cal­ly man­age the tim­ing of their com­mer­cials to max­i­mize viewership.

But if low-ranked chan­nels syn­chro­nize their com­mer­cials and high­er-ranked ones race to keep theirs apart, who wins? It depends on who makes the first move,” Yao says. The mar­ket will end up with some kind of mix — but what equi­lib­ri­um it might reach remains to be seen.”

Featured Faculty

Song Yao

Member of the Department of Marketing faculty until 2017


About the Writer

Jyoti Madhusoodanan is a Bay Area-based science writer.

About the Research

Yao, Song, Yuxin Chen, and Wenbo Wang. 2015. “Channel Search and Welfare Implications of Commercial Breaks.” Working paper.

Read the original

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