Viacom changes approach to TV ads for new Paramount Network

Viacom is reinventing advertising on its newly rebranded Paramount Network in hopes of gaining a competitive advantage for eyeballs in a world where viewers are growing increasingly frustrated with the TV commercial break. Paramount Network, which is Viacom’s recent rebrand of Spike TV, launched earlier this year with a slate of new premium scripted content that’s uncharacteristic of Viacom.

Spike TV was known for its male-oriented cut of reality TV shows like Ink Masters, Lip Sync Battle and Bar Rescue. Paramount Network, on the other hand, is looking like more of a premium content channel that Viacom hopes will be able to carve out an audience while competing with Peak TV champions Showtime, AMC, HBO and others.

Paramount Network, which Viacom execs say is targeting viewers 18-49, is presenting an inaugural lineup of originals that include a Kevin Costner-starring series Yellowstone, a six part miniseries Waco, an hour-long series reboot of the dark comedy film Heathers, and a 70s-era series starring Alicia Silverstone, American Woman.

The shows are part of Paramount Network head Kevin Kay’s strategy to enter Viacom into the “hour long drama business,” a business that is currently dominated by ad-free subscription services like HBO and Netflix. Consequently, Kay has vowed to redefine the linear TV viewing experience and its advertising model.

The first step was to reduce ad load during premium series by 30%. The first original to premiere, Waco, will have only three ad breaks during each hour-long episode, with each of those spots commanding significantly higher CPMs. And the network won’t be relying on the traditional 30-second spot, either. Viacom has struck deals with advertisers to ensure that the ads themselves fit into the TV shows with less friction. The first ad spot that aired on Waco, for example, was simply a trailer for an upcoming Paramount movie; in the future, brands will deliver retro-inspired ad spots to run against the 70s-era American Woman; and for Yellowstone, the network was able to strike brand integration deals for pick-up trucks.

Viacom has suffered significant ratings losses amid the rise of mobile video, a viewing habit that key demographics for Viacom’s Comedy Central, MTV and Nickelodeon have heartily embraced. Spike TV, which targeted male demographics, had suffered a similar decline in audience over the past few years, down some 20% since 2014.

But Spike’s advertising revenue had seen a recent uptick: Spike generated $621.5 million in ad sales in a 12-month period ending in April 2017, a 23% increase over the prior 12 month period. Viacom CFO Wade Davis mentioned during the company last quarterly earnings report that Viacom had reduced ad load 7% across all its networks in 2017.

Viacom joins a growing body of ad-supported TV networks that are trying to determine the best path forward. In response to the growing and consistent ratings slides across most of the television ecosystem, ad-supported networks have begun tweaking their ad recipes in response to consumer complaints about ad load. Last year, Fox and AMC announced new subscription tiers to their pay TV channels that would remove ads for an additional fee. While neither network has shared any subscriber numbers, FX execs have said they are “pleased” with the adoption of the ad-free tier.

But Viacom is really following in the footsteps of Viceland, the joint pay TV channel venture between Vice Media and A&E Networks, which launched in 2016. The network offers only eight minutes of advertising per hour, and some shows are completely ad-free, offering brand integrations and sponsorships instead. Vice also offers creative services to help brands craft their messages in ways that tie-in with the programming, and Vice enables brands to purchase entire ad pods for longer, narrative-type commercials. What’s more, Viceland CPMs outprice some of the top 10 cable channels.

As a TV network, Viceland hasn’t exactly been a runaway success story. The Canadian version of the channel, which Vice Media operated with Roger Communications, was recently shuttered due to low ratings and a money-hemorrhaging problem; and in the US, Viceland commands only a tiny audience compared to other pay TV channels – though it’s a much younger audience than A&E Network’s H2 channel was attracting.

Whether this new approach to advertising will pan out for Viacom remains to be seen. Viacom is looking to broaden its reach among more diverse viewers as well as keep those ad-adverse Millennials engaged with an ad-supported TV network. Kay describes this task as something like returning linear TV to appointment viewing television, rather than time-shifted television – a turnaround that seems extremely difficult in today’s entertainment environment.