Troubling Signs for Traditional TV Economics

Decreasing ratings and changes in advertising are challenging the foundation of traditional broadcast television.

The Oscars’ viewership was down 19 percent compared to last year. The Super Bowl was down 7 percent. The 2018 Winter Olympics compared to Sochi? Down 17 percent.

However, it is not just major television events that are affected. As Variety’s Laura Bradley recently wrote, “TV viewership has plummeted basically across the board, as airwaves and streaming services are flooded with more series and films to watch than ever before.”

There is a fundamental shift going on in the television business.

As streaming services like Netflix, Hulu and Amazon continue to gain clout, not only are TV ratings down, but consumers are becoming increasingly used to the version of TV that is presented to them online.

Fox recently announced that by 2020 it wants to have 2 minutes of advertising per one hour of content, according to the Wall Street Journal yesterday.

“The two minutes per hour is a real target for Fox, and also our challenge for the industry,” Ed Davis, Chief Product Officer for Ad Sales at Fox Networks Group, told the Wall Street Journal in an email. “Creating a sustainable model for ad-supported storytelling will require us all to move.”

AdWeek reported last week that NBCUniversal will reduce the number of ads in its primetime lineup by 10%. Instead, the media giant will experiment with advertising that is more embedded into shows, like sponsored segments.

“We know that the live, linear viewing experience needs to change. We are serving a consumer who has come to expect fewer ads, and more relevant ads,” Linda Yaccarino, chairman of advertising sales and client partnerships for NBCUniversal, told AdWeek.

This change in consumer behavior is affecting everyone’s bottom line.

British advertising giant WPP stock is down 14 percent as its clients react to the changing advertising market.

Additionally, companies are increasingly shifting their focus from TV ads to digital ads, where audiences can be more finely targeted.

Alan Wolk wrote for Forbes last week that, “Although TV ad revenue increased, digital ad revenue rose by 16.8%, more than double TV’s uptick. More troubling still, social media ad spending was up 42%, with Facebook alone up 55%.”

He argues that the only way TV advertising will catch up is by investing in data. Advertisers are willing to spend more money on digital content because it can be more targeted and interactive.

When browsing the internet, a profile of your demographic information and consumer habits can be built. That technology just does not work as well for TV yet.

Nevertheless, Proctor and Gamble recently cut its digital advertising budget by $200 million dollars in response to concerns that consumers just don’t respond to ads anymore.

While it is too soon to say, signs point to a tumultuous time in the TV business going forward.

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