"2020 Japan Advertising Expenditures" Special Discussion The Convergence of Online and Offline Accelerates. How Will the Role of Media Change?

In 2020, Japan's advertising expenditure decreased significantly due to the impact of the spread of COVID-19.

Conversely, the pandemic-induced restrictions on going out and traveling spurred a surge in "stay-at-home demand." This rapidly accelerated digital transformation (DX) across society, driving increased use of online shopping and delivery services, online meetings and remote work, and cashless payments.

In this discussion, we invited Professor Hitoshi Mitomo from Waseda University Graduate School, an expert in ICT and media studies, the internet, and socioeconomics, as our guest. Together with Ritsuya Oku from Dentsu Inc. Media Innovation Lab, we explore changes in people's lifestyles during the pandemic and its impact on advertising and media.

<Table of Contents>
▼The difference from the Lehman Shock era is the greater impact on the "consumer side"
▼ The distinction between TV and the internet is fading, leading to a "full circle back to TV" phenomenon
▼ Multi-screen usage shifts from "simultaneous viewing" to "sequential viewing"
▼The internet's greatest appeal is full on-demand. Television is now expected to offer this too
▼Future media should deliver information at various levels and embrace diversity

The difference from the Lehman Shock era is the greater impact on the "consumer side."

Oku: Japan's 2020 advertising expenditure was ¥6.1594 trillion, down 11.2% year-on-year. This marks the first negative growth in nine years since the 2011 Great East Japan Earthquake and the first double-digit decline since 2009, when the Lehman Shock impacted the market. It represents the second-largest drop since statistics began in 1947. Professor Miyoshi, how do you interpret this result?

Miyoshi: Looking solely at the decline in advertising spending, the numerical scale is similar, but there is a major difference between the Lehman Shock and the COVID-19 pandemic. During the Lehman Shock, the major impact was primarily on advertisers. This pandemic, however, has also had a significant impact on consumers. Furthermore, the range of industries affected is much broader compared to the Lehman Shock.

While some companies have achieved increased revenue and profits, they are understandably hesitant to aggressively pursue visible marketing strategies like advertising. Furthermore, as seen in gaming and PC-related sectors, even when companies want to expand operations to meet rising demand, component supply bottlenecks force them to control production.

Oku: So, even if certain industries or companies have grown, that doesn't necessarily mean they've been able to increase their advertising budgets.

Sanyu: Overall, the shift toward internet advertising is accelerating rapidly. It will be interesting to see how this trend evolves after the pandemic subsides. Also, while we lump it all under "internet advertising," it actually encompasses a wide variety of formats, each with different effects and impacts.

For example, YouTube ads come in several formats, including skippable and non-skippable ones. Banner-type display ads, which require active clicks, provide near-certain reach to viewers. However, when viewers encounter ads unexpectedly while trying to watch a video, online ads risk being perceived as even more intrusive than TV commercials.

Therefore, we need to keep a close eye on which types of ads are accepted under what conditions, as well as user evaluations and receptivity.

Oku: Indeed, TV programs are produced with the expectation that commercials will interrupt them. But when viewers are forced to watch ads on video sites, their receptiveness is different, right? Furthermore, the acceptance of ads on video sites differs between relatively older viewers raised on TV culture and younger audiences. The advertising industry is also tackling this as a challenge.

The distinction between TV and the internet is fading, leading to a "full circle back to TV" phenomenon.

Miyoshi: This survey categorizes total advertising expenditure into three segments: "Mass Media (4 Platforms)", "Internet", and "Promotional Media". But won't this distinction gradually become blurred going forward? I was surprised to see NHK commercials on YouTube, but thinking about it, especially between TV and the internet, the flow of content is increasing, and the meaning of separating mass media and the internet is gradually diminishing.

Lately, I feel the position and nature of the "television" appliance itself is rapidly changing. In my case, when I turn on the TV, terrestrial broadcasts appear first. I channel-surf through them, and if nothing interests me, I switch to satellite broadcasts. Satellite has some interesting programs, but if there's too much infomercial-style content, I then go online and watch internet videos right on the TV screen.

While young people are often said to watch videos on their smartphones, with more time spent at home these days, even watching Netflix dramas is more enjoyable on the big screen at home – the television set. Nowadays, the quality of online videos is on par with television, so we watch internet videos on the TV set without distinguishing them from terrestrial or satellite broadcasts.

Amidst these changes, I believe it's time to reconsider how much sense it makes to keep advertising strictly separate between television and the internet.

Source: CCI Domestic Video Streaming Service Playbook

Oku: Regarding these changes in consumer behavior, I've been using the phrase "back to TV" for several years now (laughs). Especially since last year, the stay-at-home trend has significantly influenced how people use their TV screens, leading to a widespread style of using them for video streaming and sharing.

According to a survey by Cyber Communications Inc. (CCI), a Dentsu Group company, the internet connectivity rate for TVs exceeded 50% as of June 2020. Furthermore, with major sporting events ahead and the continued spread of 4K TVs, it will soon be commonplace for most households to have internet-connected TVs with YouTube buttons on their remotes. Even when watching the same program, it will become impossible to tell whether the video is delivered via broadcast waves or over the internet, which will make things quite difficult for those compiling advertising revenue figures (laugh).

Source: CCI Domestic Video Streaming Service Playbook

Miyoshi: Indeed, it seems internet video viewing has shifted from devices like PCs, tablets, and smartphones to being watched on TV sets. However, the reverse flow—watching TV programs on PCs or smartphones—still faces significant constraints, right?

Oku: Professor Miyoshi and I serve together on the Ministry of Internal Affairs and Communications' "Study Group on Issues Surrounding Broadcasting." We've debated simultaneous terrestrial and online broadcasts for the past four to five years. NHK Plus finally launched around the same time as the COVID lockdowns.

Miyoshi: On this point, I still feel Japan is lagging behind. I understand it's difficult given television's industrial traditions and conservatism, but the interaction between the two platforms is far too asymmetrical. Government meetings on broadcasting and communications consistently focus on the narrow discussion of "how television can move towards the internet." Meanwhile, it seems the internet is taking over the "television set as a device" – – creating this kind of situation.

Multi-screen usage is shifting from "simultaneous viewing" to "sequential viewing"

Oku: Regarding online video services, for example, TVer has announced that "viewing devices for TVer are shifting from PCs to TVs" (※). As you mentioned, users are indeed moving toward "watching online videos on TV sets."

※【TVer】Service Usage Status for October-December 2020
https://tver.co.jp/news/-tver-202010-12-14f1f2-1.html

However, this raises the question: "Is simply moving TV content online the solution?" From the internet side, since TVs exist alongside PCs, tablets, and smartphones, it might seem like an extension of existing platforms. But television has always focused solely on broadcasting the main content, making it inflexible when trying to adapt it for other devices.

While examples like NHK Plus and Nippon TV's live streaming exist under the banner of "simulcast," simply streaming the same content as terrestrial broadcasts won't likely attract casual viewers, especially younger audiences who strongly prefer short-form content.

Miyoshi: True, younger people tend to avoid "long-form" content. Self-contained episodes or shorter formats are more appealing. Online videos are often short, right? TV shows, how should I put it... they try to hook you for the "next episode," don't they? (laughs)

Oku: Users who frequently watch video-sharing sites sometimes say, "The way TV shows 'string you along' is the problem." Especially for commercial broadcasters, with commercial breaks as timing points, they inevitably have to prioritize that "vertical" viewing path – teasing a little bit ahead to get people to watch properly later.

Miyoshi: When discussing recent media trends, we often hear "multiscreen." But today's younger generation consumes multiple screens sequentially. They follow a single program sequentially, switching devices—watching TV at home, then switching to smartphones or tablets when out.

Until recently, "multiscreen" implied simultaneous use—like watching TV while using a computer or smartphone. But now, the dominant style is "sequential viewing across different devices." I think TV hasn't fully caught up with this shift in how viewers live.

Oku: In the analog broadcasting era, households often had multiple TVs. Families might gather in the living room to watch together, or if someone wanted to watch something different from their parents, they could use a TV in their own room. But nowadays, most homes have only one TV, and each person has their own internet-connected device.

Last June, during the Tokyo Alert when schools closed and everyone was staying home, the MCR (Media Contact Report) data revealed high school students using the internet freely at home, playing online right up until bedtime.
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Changes in High School Students' Media Usage (2019 vs. 2020). Created from Video Research Ltd. MCR2010 (Kanto region), MCR/ex2019 & 2020 (first half, Tokyo 50km radius).

Miyoshi: When I ask students in class, "What was the first thing you did this morning after waking up?" everyone answers, "I checked my smartphone." Then, when I ask, "So, what was the last thing you did before going to bed yesterday?" they say, "I checked my smartphone" (laughs).

Oku: Nowadays, for many people, their smartphone is their first alarm clock (laughs). They start their day by checking the scheduled news alerts sent to their phones, effectively logging into the online world. It's become an inseparable part of daily life. Due to the impact of the pandemic, I think the internet has firmly embedded itself into the lives of "everyone" – not just young people, but older generations too.

The internet's biggest appeal is full on-demand. That's what people demand from TV too.

Miyu: YouTube is the most widely viewed platform online. It's viewer-participatory and overflowing with diverse content. While TV content is exceptionally well-produced, the sheer variety of content posted on YouTube offers a unique appeal that TV lacks.

Furthermore, the emergence of YouTubers showed that posting interesting videos online can generate revenue. Even without large-scale operations like TV stations, a new business model for individual entrepreneurs has emerged within the world of media and video.

Moreover, the internet's greatest appeal is full on-demand access. That means consumers can watch the content they want, when they want. Television, however, doesn't operate that way. This is likely due to the interplay with advertising.

Oku: Looking at the MCR data from earlier, after the pandemic, the wake-up times for teens, both male and female, shifted about an hour later. Without the commute time, they can relax at home longer, leading to slightly later bedtimes.

Yet broadcast schedules remained unchanged: the 7:00 news still started at 7:00, and the 8:00 drama series still began at 8:00. TV programming continued as usual, failing to account for the reality that "viewers' daily routines had shifted significantly."

Time-series changes in sleep trends (male and female teens) comparing 2019 and 2020. Created from Video Research Ltd. MCR/ex 2019 and 2020 (first half, Tokyo 50km radius).

Viewership data clearly shows that everyone was home during April-June last year, leading to higher TV viewing than usual. However, perhaps growing tired of talk shows and variety programs, people increasingly turned to on-demand online video services like YouTube and Netflix. By around October, TV ratings had returned to their previous levels.

Looking at this progression, it seems on-demand services—which let you watch what you want, when you want—were highly valued. More specifically, I believe the base for "on-demand viewing" expanded to include even people who traditionally didn't watch much online video.

TV ratings trends for 2019 and 2020. Source: Video Research Ltd., TV Ratings, Kanto Region, Households, 6 AM-12 AM, All Networks

What media should deliver going forward is information at various levels and diversity

Miyoshi: By the way, I recently came across online content compiling old commercials. There were tons of them—like Company A's instant ramen ad, S Foods' ramen ad—and I remember almost every single one (laughs). Back then, every ad had incredible impact; each commercial seemed seamlessly integrated with its respective program.

In contrast, recent spot commercials seem to have become nothing more than "time allocated to promote some aspect of a product or company." There's also talk about consumers skipping video ads, so advertising itself must become more compelling. However, in this era where TV and the internet intersect, determining what kind of advertising is effective and how best to present it remains a difficult problem.

Oku: I was a TV addict since elementary and middle school, so I remember the sponsors of anime shows back then too (laughs). That aligned with TV's characteristic mid-to-long-term brand strategy, where it connects to brand lift. On the other hand, the internet has been relatively good at short-term "harvesting." But as online videos start appearing on TV screens, I think brand lift might become possible there too.

Miyoshi: Another challenge for TV is the homogenization of information. While people increasingly get news from social media, I still think many rely on TV for pandemic updates. Many information variety shows cover COVID topics, but most feature panel discussions with hosts, expert guests, and regular commentators.

While television is expected to provide diverse information, it often ends up sounding the same everywhere. On the other hand, while internet information can lack credibility, it sometimes contains precisely the information consumers truly seek.

Oku: I feel that more people, especially younger generations who rely less on TV and get information online, are sifting through the mixed bag of information to pick out facts and forming their own understanding of "how the world works." It's often said that "mass media information is more reliable than online sources," but perhaps it's no longer that simple.

Miyoshi: By its very nature, television cannot provide information that meets everyone's needs. In that sense, its diversity has limits. For example, during a major earthquake, television is crucial for delivering primary information, but it cannot fully address needs like where to get water when the supply is cut off. That's why I think it's important to have various levels of information – national networks, local stations, or cable TV – that complement each other.

Oku: Information diversity should be guaranteed; users should be able to choose. It's probably the younger generation that understands this diversity best. As we talked, I felt the pandemic has really brought to light changes in modern society and media usage. Thank you for today.