The displacement of conventional cable TV by streaming alternatives continues, this time at the hands of the channels themselves. On Wednesday, AMC Networks (NASDAQ:AMCX) -- the name behind Sundance TV, IFC, Shudder, AMC, and other popular television venues -- announced it would join a so-called addressable television ad initiative started by a trio of cable names last year.

That decision follows a similar one Walt Disney (NYSE:DIS) revealed a week ago, when the media giant announced it would be joining an addressable TV beta program developed by TV-ratings name Nielsen (NYSE:NLSN). AMC was already participating in Nielsen's experiment that got going in January, as were Comcast's (NASDAQ:CMCSA) NBCUniversal, ViacomCBS' CBS, Discovery, and others.

One doesn't have to read between the lines. The players that have the most to lose from the demise of cable as well as the most to gain from the rise of streaming are embracing addressable television. That strong interest raises a few questions: Why? And what is it?

What the heck is addressable television?

Addressable TV is, in simplest terms, the usual video/audio message one would expect to see on a television screen but with a twist. That twist? There's either a bar code, web link, discount code, or some other means of prompting that viewer to take action right away. Usually, that action is expected to happen using a smartphone, which Nielsen says the vast majority of viewers in the United States are holding while they watch TV.

1960s TV announcer pointing to a sponsored product, in black and white

Image source: Getty Images.

As TVs become smarter, though, the television itself is increasingly a shopping platform that can whisk watchers away to a screen that can facilitate a purchase right from their TV.

The really cool part: It's not just television commercials that are addressable anymore. The shows themselves can drive commerce, for instance, by steering a consumer to more information (and a way to purchase) a particular item being used on screen by the program's actors and actresses.

AMC Networks is proactive

Enter AMC Networks, which has volunteered to serve as a proverbial guinea pig for a consortium made up of cable giants Comcast, Charter Communications, and Cox Media, which are working together in a partnership called On Addressability.

AMC Networks' president of commercial revenue and partnerships Kim Kelleher explained the company's involvement in the initiative. "[W]e are focused on bringing performance-based marketing to our clients and innovative solutions to brands, however they are interested in buying television advertising. Fortunately, AMC Networks is in a unique position to push this frontier," by dedicating some of its ad inventory to On Addressability in an effort to make the commercials airing during its programs more interactive.

It's notable simply because studios and cable middlemen like Comcast and Charter are finally working together in earnest to address the reality that cord-cutting is a threat to cable's advertising revenue. There's little that can be done about the shrinking quantity of ad impressions, but that can be offset with higher-quality ad impressions.

Making AMC's interest even more noteworthy is Disney's participation in Nielsen's experiment to the same end ... the same one AMC joined in its infancy. Walt Disney has prioritized addressable TV as well, adopting an "Addressable First" mantra at the beginning of this year.

What's at stake?

Addressable TV isn't necessarily a shift away from tradition television ads as much as it is an evolution of it. Still, there are certain things an ad aired via a streaming program simply can't be accomplished using a one-way coaxial cable feed.

Case in point: Your streaming video provider knows your home's web address, and it can likely link that address to any activity you take using your smartphone specifically because of a television commercial you saw. Internet-delivered ads can be customized for your town, whereas conventional cable advertising remains broadly targeted based on assumptions about you given the show or movie you're watching.

It's that customization (and ability to measure responses to an ad) that prompted the Video Advertising Bureau to suggest in early 2019 that the United States' addressable television market would be worth $3.3 billion this year.

That's not a lot compared to the $70.3 billion eMarketer estimated was spent in the U.S. on television ads last year. But the trajectory is the key. Overall spending on TV advertising has been drifting lower since 2018, while the expected $3.3 billion that will be spent on addressable television advertising is 300% more than 2016's tally.

That growth isn't abating, either, and it's not just a change under way in the U.S. Rethink TV indicated that on a global basis, the addressable TV market should grow from $15.6 billion last year to $85.5 billion by 2025.


It's still the early innings for the new normal in television advertising, though, making it difficult to identify which names will lead and lag. But it's worth noting that Disney, Comcast, AMC, CBS, and a few others have taken significant action just this year. The companies that can deliver more effective ad solutions will survive the slow deterioration and disadvantageous fragmentation of the television business, but that requires a bit of proactivity.

Among the media names doing the most on this front, Comcast, AMC, and Disney appear to be particular standouts.

Comcast's One Platform, operated by its NBCUniversal arm which is clearly interested in being able to sell ad space, appears to have been developed with addressable television in mind. The company made very clear when it was unveiled in February that its primary purpose is to make "every impression data-informed." One Platform, interestingly, also works with the aforementioned Nielsen's ad-measuring tech.

Disney may not even fully understand what it means when it says it's "Addressable First," but the media powerhouse clearly knows it has to prioritize addressable ads. It also has the wherewithal to ensure it's leading that charge rather than merely following the herd.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.