Why wouldnt TV companies do this in the past when TV was in the prime? Just increase number of ads and get more money. Clearly there is some limit as to how many ads to show because I dont believe they want to decrease the viewership numbers
How would you explain the increase in ads then? If there is a clearly understood equilibrium ad time, why has ad time increased? Have audiences become more accepting of ads? Have ads become more entertaining?
I'd say the more likely explanation is that there is a lag between audience loss and advertiser realisation of audience loss. TV stations manage to meet market growth expectations by exploiting this and pumping out overvalued ads to non-existent people. Over time, they've become increasingly reliant on this strategy to keep their heads above water as advertisers catch up to reality.
It can't go on forever, so they've now belatedly started their own streaming services to try and keep up.
It seems possible to me that folks who are still watching tv are more accepting of ads, whereas the folks who aren't/weren't moved to something else.
I could work real hard and try to provide more value to consumers and attract more customers, but as I said that's hard work and I'm not very creative so it may not even pan out.
I could also say, "Increase advertising by 5%!" and in the short term gain the same rewards as the other option, maybe even more. Then put that success story on my resume and move on.
At some point shareholders decided they wanted the second option. They all move on quickly as well.
That was past. Now that viewership is declining and alternative mass advertising opportunities are available what we're seeing is the death spiral. There's no natural scarcity making TV ad spots more valuable. Viewership is in decline. The only way to even maintain income levels is to increase the number of ads. If there is a formula on the perfect amount of ads, the inputs to that formula have changed.
And as such, they couldn't just run 25 minutes of ads and 5 minutes of show, because people wouldn't watch.
There are more ads now because the people who are left on linear TV are the people who are most die hard about watching it and will take more abuse, or simply don't have any idea what to do with their free time instead.
One reasonable answer to your question: TV companies didn't increase the number of ads because consumers would switch to a channel with fewer ads. In fact, they showed just enough ads to break even, as the marginal ad revenue per hour tended towards the cost of producing an hour of television (because of the perfectly competitive TV market you posit). Now the cost has stayed the same, but the number of eyeballs has dropped, so TV networks need to show more ads or go out of business.
The amount of time Twitter, Reddit, Facebook, etc. try to keep their customers away from the content they came for is astonishing.
I recently deleted Twitter because they were spamming me with notifications in the app that they were not able to spam me with notifications outside the app for live streams I never showed the slightest interest in and half the posts were topics I never chose to follow.
Reddit is neatly as bad with their random top streamer stuffed into unrelated subs, daily requests to add more interests, and a popular and news tab that are toxic.
I don’t mind the occasional sponsored item but I am pretty sure Facebook is nearing a 1:1 ratio for junk to content. There most of the content is junk too. I just check my notifications at this point because I can’t make heads or tails of what they show and what they hide or the sort order of what they do choose to present.
It is like they learned nothing from why tv and radio dying and are competing to see who becomes irrelevant the fastest.
I accidentally went to TVguide.co.uk today, on a different PC to usual, not equipped with ad blocking, it was barely usable due to ads.