Commentary
TV Ad Price Deflation Projected To Be Sustained, And Not Just For The U.S.
- by Joe Mandese @mp_joemandese, September 28, 2023
With the exception of radio and out-of-home, U.S. legacy media ad prices continue pacing downward and are projected to be deflationary for the first time since the COVID-19-related ad recession. Linear TV, in particular, is seeing downward price pressure, according to the just-released third quarter edition of ECI Media Management's quarterly inflation updates.
That's even worse than the roughly 2% decline in linear TV advertising costs ECI was projecting for this year when it released its second quarter update, just as the Hollywood strikes were beginning to derail original scripted TV programming production.
And even though the Writers Guild of America has settled its strike, and the actors union (SAG-AFTRA) are expected to follow suit soon, the impact of the strikes is already baked into ECI's projections.
Coupled with the ongoing decline in linear TV viewership, which has fallen below 50% for the first time, ECI characterized TV ad pricing as "set to deteriorate further into deflationary territory."
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"Sports content is expected to be an exception to the deflationary trend, with demand for and viewership of the NFL and NCAA likely to remain strong," the report notes.
While the long-term impact of the Hollywood strikes is projected to be most acute on U.S. ad prices, ECI projects it will also affect the global advertising marketplace, noting, "American content is of course consumed worldwide, so the effects are being felt globally."
Joe Mandese is the Editor in Chief of MediaPost. You can reach Joe at joe@mediapost.com.
Joe, this is all very theoretical and does not account for the fact that most national branding campaigns have determined that "TV" is their primary communications medium. So they have no choice but to use "TV"---linear and/or streaming--- for most of their ad budgets.
As certain sectors of "TV" programmers are faced with an endles spiral of rising costs coupled with slowly fragmenting ratings the sellers will respond in several ways. In the case of linear TV, which will continue to supply the majority of ad GRPs for the near future, we have seen only recently, huge CPM hikes---despite lower average minute audiences---this year being an exception---but mainly due to an expected economic slow down. I wouldn't be surprised to see linear CPMs rising again and continuing to do so---even as the amount of linear GRPs declines. Scarcity tends to cause inflation---not deflation.As for streaming, it will probably be forced to make itself more competitive to linear where CPMs are concerned---which means somewhat lower CPMs short term, followed by an adjustment that parallels the overal CPM trends.
What will probably develop is a campaign by the TV time sellers---led by the TV networks---to raise the value of their "impressions" to advertisers, much as they did in the mid-to late 1970s after the FCC cut back their prime time schedules by half an hour nightly and banned cigarette ads---both body blows to their ad revenue potentials. Acting in concert, the TV networks demanded ---and got--- CPM increases of 20-25% for three years in a row instead of the customary 6-8% increases. Currently it costs a TV advertiser about 2-3 cents to "reach" a consumer per ad and if one factors in attentiveness---which no one sadly does---that figure rises to about 5-8 cents. That seems like a pretty good bargain to me and the sellers will no doubt point that out when they start demanding higher CPMs---despite fewer viewers per commercial. Will they get exactly what they want? Probably not---but they will probably come close. The alternative is many more commercials per hour, plus mostly reruns and low budget program content for viewers---neither being a good result for advertisers.
@Ed Papazian: It's not theoretical. It's based on ECI's audits of national and global marketers actual spending, though its 2023 projections are forecasted based on data through the third quarter -- so far.
Re. your statement about national branding campaigns being based primarily on TV, click on the link below, go to the most current U.S. Ad Market Tracker, and click on the "Digital vs. Traditional" tab and you will that currently, 70% of all ad spending from the national brands represented by the six agency holding companies and major independent media services agencies is being allocated to digital, while only 30% is being allocated to "traditional" media, including TV.
That data is derived directly from the actual media buys based on actual invoices paid through Mediaocean's systems. It is not theoretical. It shows TV is NOT the primary medium used by national brands.
You're more of an expert than I am on the actual supply-and-demand dynamics driving CPMs and explicit ad price inflation, or deflation. I'm just a journalist who reports on what experts like you -- or ECI Media Management -- tell me.
We report on their ongoing tracking of the inflation of ad prices each quarter that they update it.
We report on Media Dynamics data anytime it releases an update of its estimates, which seem to be about once a year in terms of what we have access to, or when you mention them in comments like these.
We'd be happy to publish Media Dynamics estimates more regularly if you'd like to share them.
We would be happy to publish other expert sources' estimates, as well.
The rest if up to readers to decide.
Or comment on in fields like this one.
Curent U.S. Ad Market Tracker:
https://www.mediapost.com/publications/article/389602/us-ad-market-posts-first-consecutive-monthly-gai.html
Ed, right.
Joe, the total "ad spend" figures are not for branding campaigns, they include all sorts of advertising and, it seems, they include 20-25%( ? ) fraud for digital.Even so, last time I looked at the data , search constituted about half of the digital total.
Even if the same advertisers are involved with search and TV, it's usually not from the same budgets---search is mainly---or almost entirely---- a sales promotion function;TV is mainly a branding function. The database that you mention probably does not distinguish between branding and sales promoton, DR, and other types of "advertising" as I know of no sources that have such information. However, that does not change the fact that national branding campaigns---for branding ads---are very heavily into "TV" in one form or another. We did an analysis a few years back which came up with the estimate that about 70-75% of the average brand's national branding ad budget was in "TV"---including digital video as well as linear TV/streaming. At this point, I see no reason to alter that estimate---though it is an estimate not gospel.