How digital is saving TV companies from extinction

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CBS

Why would a late-night host on a major network potentially cannibalize his own ratings to conquer YouTube?  

For James Corden, it was all about getting his name out to a new audience.

CBS's "Late Late Show" made this clear with its most popular segment, "Carpool Karaoke."

In it, Corden drives music's biggest stars around in a car while singing together on the artist's biggest hits (and sometimes others'). In February, the show's Adele segment became the most-watched video on YouTube. 

"We wanted to make good content for television, but the thing we have least control over is ratings. The thing we have slightly more control over is relevance. The digital world is where you can make your relevance felt," "Late Late Show" executive producer Rob Crabbe told Adweek.

This is just the tip of the iceberg when it comes to traditional TV companies taking a page out of the digital playbook. The stakes couldn't be higher. Big shifts in viewership habits have been occurring right under their noses and now threaten their future viability.

The crisis for television companies is very real. The current "big four" are experiencing incremental decline in viewership year-over-year. Even more problematic is that their TV audiences are getting older and younger viewers are increasingly turning to alternative digital sources for entertainment.

A Nielsen study in October showed that in the last five years, there has been a 40% drop in traditional TV viewing by 18-to-24-year-olds. The time they previously dedicated to watching TV has moved to other activities and on multiple devices.

With that kind of wake-up call, it's no wonder entertainment dinosaurs are either teaming up with digital partners or trying to create their own new digital universe.

Here's a look a some of the biggest challenges traditional TV is facing and how they're finding the solutions in the digital and online world — with a few notable exceptions:

Challenge: Millennials are watching traditional cable TV less, and many aren't watching it at all.

While once the threat to traditional TV was cord-cutters, viewers who are canceling their cable TV and turning to digital, now there's cord-nevers. These younger adults have never been cable customers and will probably never become ones. They're watching TV online, through streaming services, and on multiple devices.

It's become imperative that traditional TV find a way to get its content in front of this group. CBS is doing this through creating its own streaming TV service, CBS All Access. For between $5.99 and $9.99 (its non-commercial subscription), subscribers get every episode of current CBS series, many classic CBS shows, and at least 90% of the country can watch its live CBS feed.

CBS has a record of being the most-watched network on TV, but its audience skews older than the other three major networks. CBS All Access, though, is proving successful in being able to get its programming in front of younger audiences. Among the service's one million subscribers, 30% are millennials (roughly 12-to-34-year-olds), according to a person with knowledge of the service who spoke with Business Insider.

Other TV networks offering their programming through a standalone subscription streaming service include HBO, Showtime, Starz, and Lifetime Movie Channel.

Challenge: Fans want TV when and where they want it.

The whole concept of live viewing is dying. With the huge amount of television offerings today and a limited amount of time to watch them, viewers want their shows available according to their personal schedule.

Cable initially confronted that with DVR and On-Demand, but for viewers, limits remain on the availability of episodes and the ability to watch on different devices.

Streaming offerings like Netflix and CBS All Access are providing fans with more episodes of their favorite shows and availability across multiple devices.

Amazon Prime Video and Netflix then took that a step further by making content available for download to watch offline.

Plus, there's a growing battle among DirecTV Now, Sling TV, PlayStation Vue, and soon YouTube to offer all the diversity of a cable subscription with a streaming product.

Challenge: Netflix and other subscription services have a wealth of data on their users, which gives them a leg up on programming decisions.

Netflix is able to cull data from its subscribers regarding which programs viewers watch, and how. That gives Netflix a huge advantage over traditional TV when it comes to deciding what shows to produce, renew, or revive.

Traditional TV is beginning to bridge that gap via its own subscription services. For example, CBS All Access could see the viewing numbers for past seasons of "Star Trek." That gave it the confidence to move forward and produce "Star Trek: Discovery," the first TV show in the franchise in 11 years.

But there are other ways to get that data without turning to a subscription service. For example, Universal Cable Productions (UCP), NBC Universal's production studio for cable shows, recently announced a partnership with Wattpad, the 10-year-old online home of original stories with a community of 45 million active writers and readers.

In April, the story site created Wattpad Studios with the goal of leveraging its talent and its user data to produce projects with entertainment companies.

"If I can be a bit brazen, we're even one-upping Netflix in some cases," Aron Levitz, who heads Wattpad Studios, told Business Insider of the richness of the company's data.

"I mean, if you’re looking at existing streaming services, whatever they are, even existing TV, you’re looking at data on content that already exists," he added. "We want to take that a level deeper, and that’s what we’re able to bring to our partners like UCP. We're not only able to look at what’s trending and big, but to take trends we see off Wattpad and say, ‘What are stories that meet that trend?’ So, you’re actually able to combine data. Where the data of the streaming service may end, we can just continue it, find even more data, and be more successful for them."

One of Wattpad's first partnerships was with the major Filipino channel TV5, starting in 2014. The Philippines is Wattpad's second-biggest market, the US being its first. Each week TV5 airs "Wattpad Presents," in which a story directed at the teen demographic is produced into that week's program.

"Almost solely on data, we look at the top stories in the country, take one up, and adapt it for TV," Levitz explained.

"Wattpad Presents" helped TV5 raise its youth viewership in the time slot by 31%. Its two major competitors, ABS-CBN and GMA, saw just a 3% increase and a 2% decrease in teen viewership for the same time slot, respectively.