Over the past few years, media analysts have bemoaned the Endof TV. Some have wondered, as ratings tumble year after year, why would advertisers continue to buy ads? Meanwhile, Facebook and Googles ad businesses have exploded, even though marketers arent spending drastically more than they have in the past. But the traditional TV industry is not dead just yet.
This month, CBS, 21st Century Fox, and Time Warnerall reported advertising revenue growth. CNN and Fox acknowledgedthey’veseen higher ratings(and ad revenue) thanks in part to the election. And, sure, CBS had the Super Bowl this year. Even so, the company saysits ad revenue is “the strongest we’ve seen in a long, long time.”
“With these ratings, this schedule, and the ad market on fire, we are salivating,” CBS chief executive Les Moonves said as the company heads into the annual advertising sales hootenanny known as the Upfronts in the coming weeks.
The media business runs on ads. But since the birth of the web, the ad business has beenchanging. Analysts expect brands tospend $68.8 billion dollars this yearon digital advertising, according to eMarketer. Even so, TV has remained the single biggest recipient of marketers’ money. As more people abandon traditional TV for streaming services, YouTube, and social media, broadcasters will have to fight to keep advertisers coming back. But by then, the dichotomy between TV and digital may not mean much anyway.
Its definitely a complicated picture, says eMarketer’s senior analyst Paul Verna. But its not easy to say digital is killing TV.
Protecting the Business
In its own way, TV is still pretty unique. The internet dramatically changed thenewspaper, magazine, and radio industries. Many advertisers are no longer willing to pay top prices (or advertise at all) in those places as the audience shifted online.
Theres a lot more inertia in television than there was in the media that succumbed more quickly to disruption from the Internet, says Andrew Frank, a longtime analyst at Gartner who follows the marketing industry.
How have major broadcasters and cable networks held onto their dominant share of the public’s attention? Well, for one, people still watch a lot of TV on TV. Major sporting events, like the Super Bowl and the Olympics, draw millions of viewers. And yes, electoral politics still largely play out on television. TV still has massive scale, it has that cachet, Verna says. If its on TV, its important.” And advertisers want to bewhere they can reach the most people.
‘It’s not outlandish to think a billion dollars will come out of the linear television market and move to digital video.’
Even for thosewho dont watch TV in the old-fashioned way, many networks have developed their own websites, apps, and digital services. Advertisers consider ads on websites and apps digital spend. For networks, however, it’s all ad money coming their way.
Take Fox. Advertisers can buy slots during The Simpsons on its broadcast station or The Americans on basic cable. They can serveads during full episodes streaming on its website, streaming apps, and Hulu.(During last week’s earnings call, 21st Century Fox’s CEO James Murdoch called the going rate for ads for Fox’s shows on Hulu “very, very attractive.” Fox owns Hulu in a joint partnership with Disney-ABC and NBCUniversal.)
But when advertisers are spending money for ads attached to TV streaming on the internet, they don’t think of it as TV.
“Hulu, Roku, Apple TV. Is that television? No, its not. Its consumed on a big screen potentially in you living room, but we consider anything delivered by an IP device is not linear TV,” says David Cohen, the president of Magna Global in North America,a major ad-buyer that works with companies like Coca Cola and Johnson & Johnson.
In other words, networks are getting advertisers’ money both ways, which for the moment seems to have led to an overall bump. But Cohen predicts marketerswill begin to see more of the distinction blur.In theshort term, I think its not outlandish to think that a billion dollars will come out of the linear television market this year and move to digital video.
Time of Transition
And yet that doesnt mean that the future for broadcasters and cable networks isultimately secure. Analysts with eMarketer estimate that more money will be spent on digital advertising than TV by next year. Ad buyers and marketers are frustrated with the fact that TV ads continue to increase in cost even as ratings, for the most part, continue to fall. Why as marketers have we agreed to pay more for that decline in audience is exactly the question, Cohen says. Magna, for its part, said last week that it was moving $250 million from its TV budget to YouTube.
As the basic cable bundle comes apart and viewers get more options to pay for fewer channels in so-called “skinny bundles,” Frank believes that less popular channels may struggleas advertisers shift dollars to digital content people actually watch. But digital advertising is also complicated. Facebook and Google may dominate when it comes to competing in the digital space. But the ads still have to be shown to be effective, which is easier to demonstrate through “apples-to-apples” comparison. This is why YouTube, with its TV-like pre-roll ads, has thrived.
Over time, ad tech will get better at helping marketers understand who you are, where youre watching, and what you want, whether you’re on Facebook, YouTube, or just watching plain old TV. And that may help save traditional TV simply because advertisers will be able to show couch potatoes more ads for stuff they really do want. Television may be changing. But evolution is, if nothing else, a survival strategy.