The US linear television industry has hit ‘permanent recession‘ in terms of the proportion of the total ad spend it commands, according to Magna. The rapid rise of digital ad spend has necessarily come at the expense of other areas and television, despite its reputation for delivering the best ROI of any medium, is no longer looking quite so unassailable. Mediapost’s Joe Mandele writes:
“‘National television ad sales will decline between -2% to -3% going forward,’ Magna concludes.
The picture is not any prettier for the local TV ad marketplace, and with the exception of election years, Magna does not expect any growth for local TV at all.”
The same is true to a lesser degree in the UK, where AA/Warc predictions in January put the % YOY change in television ad-spent at -2, even including the 11.4% increase in ad spend against VOD. That’s despite overall growth in ad spend, with the vast majority of the increase going towards internet and especially mobile. It does, however, forecast that 2018 will see an overall 1.8% growth in ad spend on television.
Similarly, forecasts for the Asia Pacific also put digital ad spend far outpacing TV for growth.
The reasons why television is no longer the safe harbour for ad spend are obvious. Despite its relatively huge audiences and traditionally high ROI, linear television is no longer the guaranteed part of younger people’s lives that it once was. Increasing numbers of cord-cutters – not to mention those who have never had a cable or satellite subscription to start with – and the rise of OTT services mean that Millennials and the next generation expect video content to be available whenever is most convenient for them.
“One firm, eMarketer, estimated there are 22.2 million cord cutters in the U.S., but combined with the “cord nevers” who never sign up to begin with, there are 56.6 million U.S. consumers going without pay TV.”
While it will never go away completely, it’s hard to see how linear television viewership will increase as a proportion of total time spent with media again.
Advertisers realise this, and also recognise the vast growth in the amount of video people are watching online. So too do the platforms on which people typically watch digital video – YouTube has never been shy about trumpeting its enormous viewing figures, and platforms like Facebook and Twitch are similarly loud and celebratory. Netflix is still investing vast sums in become the go-to OTT platform, and platforms from YouTube to Twitter are increasingly focusing on acquiring the rights to live events that would previously have been the basis of linear cable packages.
So, instead of committing to television ad spend as they one did, brands and advertisers are looking to new digital video formats in which they see the opportunity for growth. Take the Warner Bros sponsorship deal with quiz video app HQ Trivia, for instance. A relatively new phenomenon, HQ Trivia is a live quiz broadcast which everybody watching takes part in. It’s launched a UK specific version, and its user growth among Millennials is one of the great success stories of the year. Small wonder, then, that Warner Bros has put $3million into a sponsorship deal.
Similarly, non-endemic brands are looking to put huge sponsorship and ad money against esports content, given the strong growth forecasts for live esports consumption over the next few years. General brands like Gillette, Toyota and Coca-Cola are now seeking out and advertising against livestreams of esports tournaments, as well as on Twitch and Facebook Live. Esports shares with HQ Trivia a strong Millennial contingent of fans, and, crucially, growth in audience figures.
Nobody would argue that the television industry is in terminal trouble quite yet. Ad spend on the medium is still strong, even if it is slipping into recession. However, between the undeniable trend towards cord-cutting among Millennials, the blurring of lines between ‘television’ and ‘video’ that favours digital players and OTT services, and platforms beginning to assert themselves as the destination for valuable live events, it’s clear that linear television has some real challenges when chasing its share of ad spend.
But broadcasters have to stop thinking purely in terms of schedules. The great opportunity for them is to use their expertise to replicate their success with either innovative live products like HQ Trivia, or in partnerships with platforms around fast-growing industries like esports. People are watching more video, not less, and the broadcast industry is unequalled in its ability to deliver quality product. It just has to move quickly to claim its stake in future developments.
Martin Tripp Associates is a London-based executive search consultancy. While we are best-known for our work in the TMT (technology, media, and telecoms) space, we have also worked with some of the world’s biggest brands on challenging senior positions. Feel free to contact us to discuss any of the issues raised in this blog.
Header image via whatleydude on Flickr, used under a Creative Commons license.