Advertisers Tuning Out TV in Sign of Trouble for Media Companies
Television-advertising sales in the U.S. fell 7.8 percent to $61.8 billion last year, the steepest drop outside of a recession in at least 20 years, while sales at cable networks slumped for the first time in almost a decade, according to Bloomberg.
Magna Global research shows that there’s no sign of a pickup in 2018, excluding cyclical events like the Olympics and the midterm elections. The decline in TV viewership is accelerating as online rivals have increased their investments in video, capturing almost every new advertising dollar entering the marketplace. Television ad sales have fallen even as global advertising grows, leading research firms and analysts to predict that the business may never recover.
That would be a serious blow to media companies that have built multibillion dollar businesses on sponsor-supported TV networks. Domestic TV advertising revenue declined at the world’s largest media companies in the most recent quarter, striking Walt Disney, 21st Century Fox, Comcast’s flagship NBC network and Viacom.
Media companies have relied on TV advertising dollars for more than 60 years, using money from commercials and sponsors to fund variety shows, sitcoms, dramas and news-gathering. Advertising constitutes about 41 percent of sales at CBS, owner of the most-watched TV network in the U.S., and almost 30 percent at Fox.
For most of the past two decades, the TV business has fought off competition from technology giants, weathering the threat better than peers in publishing and the record business. Even as viewership has fallen, media companies have managed to extract higher ad rates. The spot for a 30-second commercial in the Super Bowl, for example, has more than doubled in the past 20 years.
Yet TV is finally succumbing to the forces that have weakened its other media brethren. The number of people paying for live TV has declined for several quarters, and advertisers are following the customers online, where social networks and streaming services command more and more of people’s time. Some of those rivals, like Facebook and YouTube, sell ads. Others, including Netflix, do not.
The effect has been widespread. Viewership of all four broadcast networks slipped by more than 10 percent last year among people age 18 to 49, the demographic most important to advertisers, according to MoffettNathanson. Cable networks, which once stole viewers from broadcast, are also suffering. Live sporting events, which had been immune to the declines afflicting general entertainment programming, are also losing viewers.
No one is predicting the demise of TV advertising, but even media companies concede that sales at traditional networks may never reclaim their old highs. Instead, they must capture a larger share of marketing dollars being spent on the internet. Fox, CBS, Disney and others are all developing new online video services, some of which offer advertising. Hulu, owned by a consortium of media giants, now generates more than $1 billion in advertising each year.
Networks are also developing data tools to offer advertisers the best of the web, superb targeting of individual viewers, with what they do best, high-end TV. Fox, Turner and Viacom have teamed up for a consortium called OpenAP, and are working to sign up other media companies.