October 05, 2017

by Wayne Friedman

This could be a daunting headline: “TV advertising hasn't yet seen real competition from digital.”

This came from a recent report by Kannan Venkateshwar, media analyst for Barclays Capital. Venkateshwar says 2017 “could be the first year that national TV advertising sees negative growth outside of recessions.”

Yet all this doesn’t seem imminent -- at least the digital media factor. Google, Facebook and others have a few issues that advertisers are still concerned with: fraud, bots, video viewability and measurement issues.

Conversely, proponents say these companies will remain big and powerful in the digital space -- commanding a major share of overall advertising dollars. They will slowly determine what needs to be done to further their business -- especially coming from that pie of $70 billion or so that goes to traditional, linear TV.

Barclays says four trends need to be considered:

First, the boundary of content and advertising continues to dissolve. Second, advertising as a proportion of GDP will go up even as TV’s share of advertising declines. Next, “reach” will retain its value relative to targeting -- although over time, this distinction may be less relevant -- and finally, shifts in advertising will be sudden rather than linear.

Oooh. That word "sudden." An unexpected tremor coming for some traditional media company.

Barclays also notes that in particular, cable networks are a riskier business model -- and its $26 billion in advertising revenue it generates.

The key issue here isn’t premium entertainment programming -- it’s about sports programming. Sports will continue to be of critical importance to TV broadcast networks -- for now. That will put cable on the back burner.

In addition, local TV is also at risk -- some $20 billion in advertising dollars spent there. While local TV has technology that is poised to change its revenue game -- the ATSC 3.0 standard -- the industry has been legendary for it slow-moving efforts, especially around traditional linear TV buying and selling.  

Barclays’ prediction about “reach” still works for local TV stations. But for how long? Looking at TV as a whole, it means some iffy times for traditional linear TV.

Does that mean increasingly less reliance on advertising and more on retransmission and carriage fees -- as well as monthly subscribers fees coming directly to all TV networks?

Get ready to write your own headline.

Courtesy of Mediapost


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