September is traditionally an exciting time for the television industry, with the broadcast and cable networks kicking off their highly anticipated fall schedules.
But this September is different, and it’s not just because the writers strike has severely curtailed the selection of fall shows. This fall also marks a potential turning point for an industry that has been swimming through a sea change for years.
Advertising for linear TV (or traditional TV watched on cable and broadcast channels) has fallen off notably in the past few months, underscored by alarming numbers during the latest round of earnings reports for the media conglomerates. It reflects a shift in viewing patterns that reached a new milestone last month, when Nielsen recorded higher numbers for streaming than ever before.
“Linear advertising continues to see an impact from market softness,” noted Kevin Lansberry, Disney’s interim chief financial officer, during a quarterly earnings call earlier this month.
And there’s no reason to expect a fast turnaround. “Linear advertising is recovering more slowly than digital, and we expect the Q3 rate of change for TV media advertising will be relatively similar to Q2, with improvement in Q4,” said Paramount CFO Naveen Chopra on his company’s August earnings call.
Streaming Content Rises, Linear TV Falls
The shift is not exactly a surprise. Since Netflix moved into originals more than a decade ago, and the advent of devices like Chromecast, Fire TV Stick and Roku made it easier to stream content on a TV set, the industry has anticipated a move toward streaming.
Till this summer, traditional TV had kept an edge, but there were signs of a transition in the offing. In July 2022, streamers drew a record 34.8% of all TV views. Then, this past July, streaming attracted a record 38.7% of all viewing, driven by acquired content like Suits on platforms such as Netflix, Hulu, Max and more.
That outpaced cable, at 29.6% of all viewing (down from 34.4% last year), as well as broadcast, at just 20%, a new low and off 5.4% from the same month last year. The strike hadn’t really impacted traditional TV schedules yet (the broadcasters largely air unscripted shows in the summer no matter what), so that’s not a factor in the decline.
It tracks, then, that advertising would be losing steam for traditional TV. Advertisers follow the eyeballs. If people are drifting away from cable and broadcast, then advertisers will as well. They’ll find cheaper alternatives on digital, where the cost for reaching 1,000 consumers is lower. Plus, with platforms such as Disney+ and Netflix adding ad tiers that have shown success, advertisers can follow viewers to their preferred place to watch.
The strike likely will only make things worse. The Big Five broadcast networks have ripped up their fall schedules, replacing dramas and comedies with reality programs and game shows, which aren’t expected to spark the same level of excitement as new scripted shows. The media buyers and planners who advise on where to place advertising know this, and they’ve likely come up with contingencies that will impact linear TV ad spending even more.
A Tough Advertising Environment
Executives noted that while there certainly are factors unique to linear TV that are impacting the market, others don’t reflect on the medium itself. Automotive advertising has been down for a few years. And overall ad spending forecasts are down, reflecting a pullback across multiple media.
There are some outliers, of course. While Disney noted that linear networks operating income declined versus the prior year by $580 million, driven domestically by lower advertising and affiliate revenue, among other factors, it also saw better results from ESPN, where ad revenue increased 4% in third quarter.
And with conglomerates diversifying their holdings—Discovery, for instance, is a major player in cable with lots of cable networks but also a meaningful streaming presence with Max—that will help them weather the TV ad spending downturn.
“I think a lot of us expected that we’d see a meaningful recovery in the second half of the year, and we haven’t seen it,” Discovery CEO David Zaslav said on his earnings call. “We can’t predict what’s going to go on with the linear platforms. But we have a lot of command and control. And the viewership on our platforms is actually quite strong. There's a load of people still loving and watching our content, and most of our content now is going over to Max.”
"TV" - Google News
August 29, 2023 at 02:25AM
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With New Season On The Horizon, Traditional TV Is Struggling - Forbes
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