The notion that standard, linear TV… that’s what we call live TV you watch in your living room … is dead or dying is an often sensationalised vision of impending and speedy doom. Indeed its death has been forecast now for the 18 years of my media career.
But even media old-timers like me can’t ignore the fact that TV is changing. It’s evolving in the wider, fast-changing media landscape. And perhaps that evolution is accelerating with each passing year.
Possibly the biggest challenge for linear TV in the mid-term is the change in demographic make-up of viewership, particularly by age band. The numbers themselves aren’t necessarily a problem. The impact on commercial revenues for broadcasters most definitely will be!
Over the last four years, all adult commercial TV ratings are falling. Yet, only marginally so, at minus 4% for the market. The trend is mirrored for all adults across the sales houses, with the exception of Sky. They have bucked the market, experiencing a like-for-like growth in ratings of around 3%.
This overall trend for adults has been mirrored for other key sub-demographic audiences. ABC1 ratings are down across the market by 4%, while 45+ audiences are down on average 2%. For 45+ viewers though, some marked variance is notable. While ITV are losing around 7% of ratings compared to four years ago, C4 and Sky Sales are experiencing increasing viewing across their station portfolio. Sky in particular has seen double-digit growth.
The picture is a lot less optimistic amongst younger viewers however.
Amongst 16-34 year old adults, the average drop in commercial ratings between 2013 and 2017 is a pretty chunky 15%. This is way above the average across the wider adult audience. Both Sky, and C4 Sales in particular, experienced falls beyond that average. Unsurprisingly, all the well trumpeted factors around technology and shifting, fragmented viewing habits are relevant causal ingredients to this decline.
This matters to broadcasters because the younger demographic have generally always been harder to reach via the big screen at home. Even more so now then with their declining viewing habits! Traditionally, 16-34 adults have therefore commanded higher media cost per thousand (CPT) prices. In other words, for broadcasters, the decline in ‘supply’ of this audience is creating a revenue hole that cannot be easily plugged elsewhere.
The average CPT to reach 16-34s is between three and eight times that of broader TV buying audiences. On a like-for-like basis, broadcasters need to therefore sell a disproportionately greater amount of TV ratings against other buying audiences to offset any losses against their prized younger adults. Although C4 and Sky Sales have seen decent growth in 45+ audiences, the increases are nowhere near enough to compensate. ITV’s problems are even more pronounced, given that they are haemorrhaging audiences both young and old alike, they have little scope to offset revenue losses.
Looking to the next generation doesn’t provide much encouragement for broadcasters either.
Kids’ viewing is down across the market 25% versus four years ago. This is hugely significant because these are the potential adult TV viewers of the future. They are the next highly sought after 16-34 demographic. The fact their viewing is declining even more aggressively than the current generation suggests declining linear TV viewing trends will continue. The resulting revenue issues for broadcasters will thus only become more acute over time.
Why should broadcaster revenue woes matter to advertisers and agencies? There are five very good reasons…
Upward price pressure on all TV spot advertising
The decline in the supply of ratings, especially of more lucrative trading audiences, will put general upward pressure on pricing as broadcasters try to balance the books. Crucially, this will be the case even when advertiser demand is stagnant or in slight decline. Aside of a major catastrophic economic event and its subsequent fallout, significantly falling price trends are far less likely in future.
Advertisers targeting older demographics may pay more to reach them
As revenue decline from younger demographics bites, the value of remaining older demographics will be far greater than broadcasters give credit currently. They are also the audience with much of the economic wealth. Where their viewing is growing and helping to prop up overall revenues, such as with Sky and C4, an opportunity to further monetise that growth may be too hard to resist. This could be realised through higher future CPTs. Clearly this would adversely affect campaign efficiencies, be they brand or acquisition focused ones.
Gaming BARB will become harder
We know BARB under-represents smaller spots and smaller stations. That is great for advertisers who don’t need to rely on BARB data as the only measure of their campaign success. Essentially under-reporting means advertisers are getting audiences and any subsequent engagement or sales for less to free. Revenue-chasing broadcasters are cottoning on to this. Sky has their own audience viewing data and are monetising increasing amounts of low-audience airtime with initiatives such as Sky AdSmart. This is bad news for advertisers as it means fewer highly efficient and low cost spots will be available through standard airtime buys. The end game may be some type of programmatic buying platform but, whatever the future direction, expect other broadcasters to look at similar revenue-generating schemes as pressure on linear audience supply increases.
Newer, alternative viewing routes will remain relatively expensive compared to linear TV
Increases in non-linear viewing via VOD or similar will remain very expensive. They also don’t deliver any ‘secondary audiences.’ Clearly some of the current decline in linear viewing is due to a shift to deferred viewing across non-linear platforms such as ITV Hub, All4 and Sky On-Demand. This trend will only continue to increase over time, particularly for more appointment-to-view and flagship properties. Currently, most activity of this sort is sold on a similar CPT metric, but at higher values due to the supposed highly targeted nature of the viewer. As supply increases, it will be interesting to see if pricing falls to more cost efficient levels. It may well be that higher CPTs are, instead, maintained to help offset losses from linear revenue. And while high levels of targeting are of benefit to advertisers, there is always a prohibitive price point. Additionally, and unlike linear TV, there is no secondary audience delivered via VOD. Such secondary audiences often provide additional value to the advertiser that is effectively not paid for.
Aggressive broadcaster trading may result in severe under-deliveries
In a tough market, broadcasters will likely trade at the very limits of their forecast inventory supply to maximise revenues and minimise any future bad news for shareholders. Trading at the limit means they will have zero room for error if actual delivered ratings vary significantly negatively from forecasts. In such situations, a broadcaster would have major industry-wide under-deliveries to manage. The likelihood is that the current trends in the linear TV market will magnify these market challenges in future. Being continuously on top of campaign delivery will be just as important – if not more so – than it is now to ensure future campaign effectiveness is not compromised.