Ad agency holding companies are ruthless at prioritization. These massive organizations command so much of the world’s advertising budgets that they need to put resources behind the biggest markets while simultaneously seeking cost reductions in other areas. All of this is in service to the bottom line.
Now cost reduction is coming for one of the biggest advertising channels ever. In the next two years, linear TV will be deprioritized so much that holding companies will begin outsourcing their linear buying. That is all of linear TV, encompassing both broadcast and cable, large and small networks.
If that sounds absurd, then you haven’t been paying enough attention. This transition has already begun, with holding companies essentially abandoning local linear TV buying.
The need to shed operational burden
For decades, local linear buying was the bread and butter for holding company media agencies. This began changing about two decades ago amid a growing number of national cable channels, the growth of digital media and the rapid growth of streaming.
Local linear buys quickly became too time-consuming and expensive for larger agencies and holding companies to make any margin on the buy. As a result, almost no holdco wants to buy local linear TV. To better serve their clients, the majority now outsource local linear buys to specialty agencies.
Local linear is following the path of other channels, like print and radio, which used to be a massive part of media buys but aren’t anymore. Recent news of WideOrbit’s decision to sunset its supply-side platform, Upzing, effectively pulls the plug on its linear TV inventory. Companies like WideOrbit served as the backbone for holding companies looking to keep linear execution within their walls. But with its shutdown – and the subsequent end of its demand-side platform – ZingX, one of the last major pieces of infrastructure supporting that model, is gone. This could accelerate the broader industry move toward outsourced or hybrid approaches.
With the rapid rise of streaming, what makes the rest of linear TV so important that holding companies need to hang on? Like radio and print, there is still an audience. But from an economical standpoint, holdcos’ best bet is to outsource their linear desks to reduce their costs.
The shrinking linear market
If this timeline feels accelerated, take a look around. Consumer time spent with linear has dropped from 72% in 2020 to 57%. This year’s upfronts represent a sea change where linear TV is now the appendix to streaming buys. Every major media company has its own streaming platform with an ad-supported tier, and they are all staking their futures on these platforms.
Even the big live sports events – linear TV’s saving grace – are being sold as packages that require matching buys on streaming content as well.
This train is only moving forward. Linear is taking a backseat to streaming in terms of both advertiser interest and publisher priority. While some holdcos may offer linear buying as a courtesy for clients, the most likely path is that it is outsourced to specialist companies to reduce costs.
This is good news
While linear TV’s importance is waning, it is nowhere near irrelevant. Linear still represents a great pathway for buying an audience with scale and efficiency in a way that drives performance.
For holding companies, there is limited profit and almost no room for growth. On the other hand, this is good for small agencies, business processing outsourcers and tech companies that have automated linear. The same goes for the brand clients. Working with a smaller company that brings expertise and focus means that brands can continue to divert spend to a channel that tens of millions of consumers still watch, and they can do so at an efficient return on ad spend.
Outsourcing is simply what happens in the advertising industry when a channel is marginalized. We’ve already seen it with radio, print and local linear. These channels represent too much work and not enough profit for the major holding companies.
Anticipate a fleet of newer agencies that will specialize in linear TV to handle the outsourcing from the holdcos.
“On TV & Video” is a column exploring opportunities and challenges in advanced TV and video.
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