TV viewership is now decreasing faster than linear TV inventory prices are increasing, according to Magna’s latest forecast.
This shift is causing the TV networks’ revenues to slip.
Global linear TV ad spend was down 4% year over year to $289 billion in 2019, according to Magna. This year for the first time, TV represented less than half of total global ad sales at 48.5%.
In the United States, national TV ad sales were down 3% year over year to $42 billion, and are expected to continue declining by another 1% to 2% in 2020 as the economy slows. Even factoring incremental ad spend for the 2020 Olympics, which will total a predicted $750 million, national TV ad spend growth will be down by 1% in 2020, Magna said.
“Cyclical events in 2020 are not enough to fully stabilize national TV ad revenues,” said Vincent Letang, EVP of global market intelligence at Magna.
Linear ratings have been slipping for years, but networks have been able to stave off revenue declines by using scarcity to increase the price of their inventory. Marketers have paid that premium, since no other channel can drive reach as efficiently as linear TV.
But marketers are now getting priced out of the linear TV market – especially overseas.
“The ratings erosion is accelerating, the CPM inflation is accelerating, but the pricing is not growing quite as fast enough to offset the decline in ratings,” Letang said. “The demand is struggling to follow.”
As an alternative to linear, marketers are turning to digital, where ad revenues were up 15% globally to $306 billion, and grew 16% in the United States to $110 billion. Digital is maturing, however, and growth rates are down from 18% to 20% globally for the past four years.
Marketers are also shifting spend into other mass linear channels like audio and out of home to recreate the effects of TV. According to Magna, US radio sales were stable at $13.5 billion this year, up from a 2% decline in 2018. Including digital audio and podcasting, which were up 10% to $3.2 billion this year, total US audio ad sales grew by almost 2% year over year in 2019 to $16.7 billion.
“National advertisers have looked at radio more favorably partly because national TV has become so expensive,” Letang said.
Out of home had a similar success story, growing revenues by 6% this year globally to $8.4 billion. Digital out of home fueled much of that growth, increasing revenues by 20% globally as more inventory that can be accessed programmatically opens up in big cities. All of the biggest tech brands, including Amazon, Facebook, Google, Apple and Netflix, are part of the top 20 out-of-home spenders, Letang said.
But for many marketers in verticals like CPG and Pharma, there’s still no replacement for the efficiency and reach of linear TV. Those verticals will continue to pay the premium for TV ads, even as others balk.
“Every vertical and brand has their own model of internal investments for media channels,” Letang said. “TV still rates very high.”
And for those advertisers who can’t pay the price, linear networks like NBC are launching ad-supported streaming services to try and recoup some of that lost spend. Adding in the impact of AVOD inventory, national network revenues were flat this year, Letang said.
Global ad revenues grew 5.2% in 2019 to $595 billion, and US ad spend grew by 5.1% to $224 billion, according to Magna.
Next year, the Olympics, the European football championship and the US election will add more than $7 billion in incremental revenue to the global ad market, leading to 5.7% global ad spend growth globally and 7.2% ad spend growth in the United States.
Political ad spending alone in the United States will grow 15% to 20% to drive “well over $1 billion” of incremental spend across media formats, Letang said. Local TV will benefit heavily, growing an expected 13% in 2020 to hit $21 billion in ad sales and bringing in $3.5 billion in incremental revenue.
Without the election, local TV ad sales would shrink by 4% in 2020.
“That will, as always, benefit local TV, a little bit of national TV and digital will get a significant share,” Letang said.
In addition to getting a boost from political ad spend, digital is expanding its share of the advertising market thanks to Amazon, which is capturing trade and merchandizing budgets as they move online. Amazon is to thank for search budgets growing a robust 16% in the United States this year to $62 billion, despite being a mature medium.
“It's coming from below the line, so it’s really growing the pie,” Letang said.