Editor's note: As a number of comments from readers have pointed out, this edition of "On Media" incorrectly states that total U.S. TV advertising was $28.6 billion in 2010. While industry estimates vary, the most recent figures from Publicis' ZenithOptimedia Group estimated that 2010 TV ad spending was $56.5 billion. A correction has been published to make readers aware of this error.
Advertising-dependent television may have dodged one bullet this year only to be crippled later by an intensifying barrage of economic and tech threats that will alter its fragile status quo.
Just this week, the Internet Advertising Bureau confirmed that $26.4 billion in Internet media spending in 2010 handily beat $22.8 billion in newspapers. It's just a matter of time before it matches TV's dominant $28.6 billion in revenues last year, $16 billion of which is from broadcast and the remainder from cable.
After all, the online ad market grew 15% during the heart of the recession from 2009 to 2010. Why wouldn't it pick up more steam with increased consumer and enterprise digital adoption? Nascent mobile advertising has nowhere to go but up.
A closer look at the IAB's new report shows that Internet ad revenues are driven by retail, telecom, financial services and autos, which have been TV advertising mainstays. They are clearly attracted to the more justifiable performance metrics and measurable ROI. Not too many years from now, many marketers will be wondering how they ever were suckered into slapping their money into the TV networks' critical mass in hopes that something sticks.
With tech and cash-rich interactive giants like Apple, Amazon, Time Warner and Netflix battling over streaming video supremacy, the traditional TV-invested companies stand little chance of controlling their advertising destiny over time.
Before the end of the decade, a significant portion of television's ad dollars will either be diffused across or outstripped by competing digital media outlets. This is not to say that broadcast and cable television will not continue to play an important role in providing marketers with a mass audience -- particularly for major sporting, entertainment and other live events.
Until now, traditional media has understandably hung onto what works rather than jumping more fully into a new interactive media world plagued by its own uncertainties. Still, even Wall Street is beginning to wonder aloud about reaching a pivot point, and whether the television networks have been the beneficiaries of an ad recovery that appears to be more substantive in theory than reality. The industry's story this year and beyond is generally one of no growth or slow growth, couched by economic and new tech unknowns.
With the economic outlook for consumer spending dampened -- if not decimated -- by the stubbornly grim housing and job markets and impotent politics, media analysts say they see no growth catalysts until next year's presidential elections. It is a cyclical artificial boost to television advertising -- and it will be shared with digital and social media.
Spiking fuel costs, Japan's disruption to automakers and looming inflationary pressures are more than "hiccups" clipping any sustained consumer recovery. A myriad of indicators this week underscored a growing despondency. The New York Times/CBS poll Thursday indicated a new two-year low for American pessimism about our economic outlook just days after Standard & Poor's revised its outlook on the nation's Triple AAA rating to negative from stable.
USA Inc., a provocative examination of the country's financials using public corporate criteria, was widely published by Internet guru Mary Meeker and is available for free online. It presents a devastating portrait of an America whose unchecked debt and obligations a decade from now will leave it without sufficient funds to support education, defense, infrastructure and R&D -- which accounts for one-third of USA Inc. spending today, down from 69% 40 years ago. That can't be good for anyone or any business.
A "healthy" recovering ad market is likely to "tread water" going forward on new and continuing economic fears, according to Nomura analyst Michael Nathanson. Some companies may realize single-digit increases in ad revenues this year; others are flattening their estimates or conceding they will lose at least 5% on the local front.
While traditional TV advertising has bounced off its near 70-year bottom, it will never again be meteoric. As long as the country is mired in paralytic bad news and the absence of genuine growth, companies whose fortunes are tied to consumer spending face unsteady or even no financial progress. Even media analysts who are bullish about the upfront concede there are too many critical factors in play to identify the new status quo for ad-dependent television later this decade.
Adding to the uncertainty is the fact that supplementary revenue streams may only prove to be short-term solutions. The retrans and licensing fees that cable, satellite and telecom operators are now paying to carry TV network and local TV station signals will last only as long as distributors can justify or afford it.
The proliferation of over-the-top streaming video options and consumer reliance on mobile connectivity will prompt changes in the way they all do business. The precipitous decline in home video demonstrates how quickly consumer behavior can bring down a sector. While film studios are trying to claw back some of their lost exhibition window dollars by offering earlier VOD, they face threats from new digital options.
Only the most compelling niche television sectors (such as Disney's ESPN and Viacom's kids and teen networks) will continue to be wildly successful in a long-tail media universe. While CBS has thrived on heavy cost cuts with an aggressive pursuit of fees, it has no horse in the connected media race. CBS' recent deal with Netflix is an easy short-term bet on streaming video of archived programs it cannot sell into a declining syndication marketplace.
Broadcast TV networks, in particular, continue to bleed ratings and audience in their traditional venue; a widening share of their advertising will be siphoned by online and mobile.
Like newspapers, many local TV stations are out-maneuvered by savvy, inexpensive online, social and hyper-local options -- from Groupon to Google to Facebook. Their costly physical plant and legacy operations can't compete. For some TV station owners -- perhaps eventually including Disney's ABC and Comcast's NBC -- exiting the business may be the only answer amid what is sure to be rampant streamlining and market consolidation.
As the TV networks peddle their upfront bill of goods, think about the broader context of economic and tech change. It brings new meaning to the words "new season."
well researched article in context with the under currents that are occurring across the spectrum of "traditional" media. The wild card factor is we are due to see new entrants -- ones that are well funded in the space -- to emerge from nowhere and potentially change the industry in ways we have not anticipated. The wild card in question is when the data from mobile, tablet, and TV all start to traverse all devices in a cohesive data pipe that controls the video.
the online baby is not "ugly"....no need to babble on about its beauty!
A big splash of cold water on the fortunes of broadcasters.
Of course a self-promoting ersatz new media guru such as you would forecast the impending death of television. Please, just shut up and go back to tabulating online click-thru rates that are in the toilet.
Definitely a thought provoking piece, but for the foreseeable future, consumer behavior remains largely on the side of the TV industry. According to Nielsen’s Three Screen Report, the typical American watches over 35 monthly hours of TV (2 hours of which is on a time-shifted basis). That massive amount of time watching TV represents more than 8 times the monthly time spent on the Internet, more than 100 the time spent with online video, and 500 times the time spent with mobile video. Another important consideration is that TV advertising is becoming more targetable and measurable (household addressable TV advertising already reaches millions of consumers and will expand its reach substantially over the next few years). Bringing these key new capabilities to a medium that consumers already spend a huge majority of their time with will enable advertisers to create powerful ways to integrate TV with other marketing channels and develop attribution models that further refine marketing effectiveness and ROI. The TV industry needs to embrace its evolution from a mass to a targeted communications channel. As in doing so, it will not only survive but even thrive for many years to come.
This statement is far off: "They are clearly attracted to the more justifiable performance metrics and measurable ROI. Not too many years from now, many marketers will be wondering how they ever were suckered into slapping their money into the TV networks' critical mass in hopes that something sticks."
Nice fantasy statement. But experience shows that TV drives sales at retail stores in far larger quantity per dollar than any of these so-called "measurable ROI" media. In part, the web claim of measurability is rarely found.
And, as I've noted elsewhere, if the web is so targeted, it should be premium priced. Why is it that web advertising is so bargain basement? Because it's really not effective for most advertising tasks.
a little fact-checking here...what is the US TV advertising total spend? I thought total advertising in the US as per Zenith Optimedia was about $160 billion and that TV was 40% of that, meaning TV is about $70 billion in the US, not $28 billion. Please tell me what I am missing here.
Here is another valuable perspective...
You going to come back and fix your errors, or just leave them? US TV Ad spend is north of $60 billion, SIXTY billion, not 26.8 as reported in this "article."