ENews & Tech Antenna TV has surprising staying power
In the 1970s, TV antennas dominated households worldwide. In the 2020s, they may do so again, thanks to as many as 2 billion viewers who are willing to watch ads in return for free programming.
When television was in its infancy, broadcasters spent billions of dollars on TV towers to distribute their shows to antenna-equipped homes, where viewers watched the content free of charge. While alternative methods of transmission have long since emerged, that legacy still plays an important role in the TV market, with many broadcasters offering on-air television free to viewers with an antenna.
This year, approximately 1.6 billion people worldwide, representing 450 million households, will get at least some TV programming from an antenna, according to Deloitte’s Technology, Media, and Telecommunications Predictions 2020. And that’s the low end of the estimate: Deloitte’s analysis suggests that number could be as high as 2 billion.
Along with a predicted $32 billion in 2020 revenues from ad-supported video on demand (AVOD), antenna TV is helping the global TV industry keep growing even in the face of falling TV viewing minutes and, in some markets, increasing numbers of consumers cutting the pay-TV cord.
Who’s paying for all that free TV? Advertisers. Although forecasts now predict that TV ad spending will be weaker than expected in 2020, ad buyers are still out there and looking to connect with audiences.
Traditional TV Faces Headwinds
Despite the strength of the antenna TV market, several signs point to challenging times ahead for the traditional TV industry as a whole (pay TV and antenna TV combined). In the United States, the number of paying TV subscribers will likely decline even more sharply than expected in 2020, according to Deloitte’s estimate. Although TV-viewing minutes may rise during lockdowns, Deloitte expects the previous trend of declining viewing minutes to resume post-pandemic, with doubledigit declines among the youngest age groups.
TV viewership growth in the rest of the world more than offsets these declines, at least for now. In aggregate, the number of pay-TV subscriptions worldwide is expected to rise by 8% between 2018 and 2024, reaching 1.1 billion in 2024. Even though more people are subscribing to pay TV, however, the industry as a whole still isn’t making as much money as it used to: Global TV industry revenues are forecast to decline by 11% by 2023 compared with 2019 levels.
Before COVID-19 caused advertisers to pull back spending, traditional TV was a relatively bright spot for ad sales. In the United States, average annual upfronts— the industry’s yearly presales of ads, which have historically generated about half of annual big-brand TV advertising spend—went up by 2.4% in 2019 year over year. Before the pandemic hit, upfront ad sales were expected to rise in 2020, and they may still outperform other categories of nondigital advertising.
Why aren’t things worse for broadcasters’ TV ad revenues, at least in markets like the United States, where viewership is falling? Here, antenna TV—whose viewers mostly don’t skip ads—may well be one of the factors making the difference. More than 40 million Americans in at least 16 million homes watch antenna TV, up 48% since 2010; in the United Kingdom, for nearly 30 million people in 12 million homes, the only source for traditional TV is an antenna, up 2.3% since 2012.
Besides antenna TV’s growth, another reason for TV advertising’s resilience may be the development of targeted or “addressable” ads. If a home has the right kind of box or TV, advertisers can deliver specific ads to specific households (though not to individual viewers) at premium rates.
Future Business Models: Mixed Forecast
TV is not following the same path as some other traditional media, such as newspapers, which have suffered multiyear double-digit advertising declines. Even in the face of the pandemic, global TV ad spending may be relatively resilient. Interestingly, many of the more resilient TV ad markets are also ones where antenna TV usage rates are the highest.
Antenna TV’s persistence shows that up to 2 billion viewers worldwide are willing to make a deal: They will watch some commercials (sometimes a lot of commercials) in exchange for free programming. This willingness is not confined to antennas and terrestrial broadcasts. With the growth of AVOD, hundreds of millions of viewers in 2020 could make the same deal, choosing to watch some percentage of advertising content in exchange for free, or at least discounted, quality video entertainment.
It seems likely the future of TV will contain a mix of business models. Some TV watchers—about a tenth of the population in developed countries—utterly refuse to watch ads and will be willing to pay for the privilege. Others, who are willing to watch many ads but want to pay nothing on an ongoing basis, will watch only antenna TV. This latter group likely represents another tenth of the population in North America, but it is higher or much higher almost everywhere else. The expected number of antenna TV viewers varies considerably across regions and among countries within a region, according to Deloitte’s analysis of market research and publicly available data. For instance, in Europe, the gap between the countries that watch the most antenna TV and those that watch the least is greater than 90%. And then there is the middle ground: 80% of TV watchers who fall between those two extremes, paying varying monthly fees and watching varying amounts of ads.
***
The TV industry may not be growing at the rate it did 20 years ago, but neither is it collapsing, and both advertisers and broadcasters could do well to account for its staying power. While the rise of subscription video-on-demand services has disrupted the traditional TV model, antenna TV—with a legacy of free, ad-supported programming—continues to play a significant role in the industry.