Commentary
Network TV's Double Whammy: Flat Pricing, Declining Supply
- by Joe Mandese @mp_joemandese, September 18, 2023
While there is some good news in the fourth-quarter update for the U.S. ad economy, IPG Mediabrands' Magna unit paints a tale of two media marketplaces -- traditional and digital -- with most of the former declining, especially the major broadcast networks, which already have been facing their first ad price deflation in decades, and as well as what looks to be protracted Hollywood writers' and actors' strikes.
"National TV networks are facing a double challenge on pricing, with almost zero CPM inflation for the first time in 20 years, and on supply as the writers’ strike may lead to a lack of fresh content for the first half of 2024," Magna Director of Global Market Intelligence Michael Leszega said on the eve of this week's update, adding that the strike likely will have long-term effects, accelerating the long-term decline in network TV viewing.
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The problem, adds Magna Executive Vice President of Global Market Intelligence Vincent Letang, is that the gains the networks have been making in nonlinear TV advertising sales, are not enough to offset their traditional sales declines, something that is equally true for most traditional media that also sell digital advertising formats. In fact, the only traditional medium to see any material ad demand growth has been out-of-home (see table below).
“Q2 was marginally better than Q1, but most of the formats continue to suffer declines in sales year-over-year," Letang said, adding: “The ad revenues of traditional media owners continue to stagnate or decline, despite the fact that their digital formats are doing well.
"In the first half, nonlinear TV ad sales, for instance, grew by 7%, podcasting advertising grew by 14%, and digital out-of-home grew by 9%. But so far, the growth and success of their digital formats is not enough to offset the long-term decline of traditional linear formats in audience and in ad sales."
Joe Mandese is the Editor in Chief of MediaPost. You can reach Joe at joe@mediapost.com.
If the broadcast TV networks had the kind of audiences they once had---fairly evenly spread out among all age groups--with ABC going heavily young, CBS heavily old and NBC in between---the writer's strike might have a huge negative impact---especially as in times past----since 1975---- almost all prime time shows were scripted. But now, with heavy viewing oldsters dominating their audience compositions and many shows being low budget "reality" fare or newsmags, I don't see a rating disaster befalling the broadcast TV networks---aside from continued attrition due mainly to cord cutting.
As for the effects of the upfront's modest CPM declines, that's a problem---but not necessrily a long term one. It will carry over to next year, of course, but it's not a certainty that the sellers can't recoup in the next upfront---with gains in CPMs---especially if streaming's FASTs and AVODs try to maintain their high CPMs.
Nevertheless, we are predicting a decline in broadcast TV network profitability for 2023----dropping to the lowest point in many years---but fortunately for the networks retransmission fees, which are the primary contributor to their profits, have continued to hold up---despite cord cutting. The solution, temporarily, will, no doubt, feature a combination of added commercial clutter and the use of more reruns and low cost program content---not good news for the writers or actors as this will reduce the number of scripted shows ordered when the strike ends and the networks will buy fewer episodes of each series to boot.