Advertisers tuning out TV in a sign of trouble
Advertisers may be leaving TV for good. Television-advertising sales in the US fell 7.8 per cent 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. And there’s no sign of a pickup in 2018, excluding cyclical events like the Olympics and the midterm elections, according to data from Magna Global.
The decline in TV viewership is accelerating as online rivals Google and Facebook 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.
“In a healthy economy, we’re looking at no growth in advertising from traditional media companies,” said Michael Nathanson, an analyst with research firm MoffettNathanson. “That’s a worrying trend.”
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 per cent of sales at CBS, owner of the mostwatched TV network in the US, and almost 30 per cent 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 customer 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 per cent 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. Ratings for the National Football League, the mostwatched programming on TV, have fallen for two years in a row.
The decline robs media companies of eyeballs to sell to advertisers still hungry for live audiences. And TV networks with fewer ads to sell are also facing a revolt from some of their biggest advertisers.
Pharmaceutical firms, movie studios and automakers have all slowed their spending on TV advertising. Spending by all three groups, among TV’s most important sponsors, dropped by double digits — even as their businesses slumped by far less. — Bloomberg