Used to be that TV advertising revenue changes -- growth, declines, and everything in between -- would have a specific relationship to gross domestic product.
Now that's no longer true. A new report from Barclays says: “While secular concerns on television advertising have emerged over the last few months, we note that the beta of major television advertising segments to GDP has been falling over the last decade.”
It adds: “This is happening even as the beta of digital advertising to GDP is actually going up. Consequently, the marginal growth dollar has been moving away from television for a while, a process that has not yet resulted in negative growth overall but cannot be ruled out over the coming years.”
TV marketers will continue to talk about how the return on investment in their TV media planning continues to work well. But with digital increasingly cutting into consumption, things keep changing. One needs to keep an eye on new relationships and the the broader measures -- just in case. Barclays says “a simple regression approach will need to be adjusted.”
Now based on what Barclays says is “our economist's nominal GDP growth estimate for the U.S. in 2015 of 4.4%, we arrive at network television advertising growth of low single digit decline to flat and cable growth of 2% in 2015 overall.”
Ugh. In years past, the growth rate of national broadcast/cable advertising would regularly be higher than the GDP growth rate.
Change can be uncomfortable. Mind you, the shift of ad dollars to digital over the past few years has no doubt already meant some trouble in your neck of the woods.
And if that doesn’t worry you, Barclays says the uncertainty around U.S. television advertising this year is the highest it’s been in some time -- all, somewhat weirdly, in this face of a strengthening U.S. economy.
In other words. put a new line item or two in your TV media plan for this year: volatility.
Remember 5 or so years ago when magazine and newspaper executives where like "nah, we're good!" ?
While TV content is better than ever the network model doesn't look so good.
The basic difference between TV and print media, is the obvious fact that most branding advertisers believe that television---in whatever form----is a more powerful way to communicate their ad messages than print. So, as TV's audience fragments, they will adapt ----by using more channels and dayparts, plus digital video---if priced fairly, based on actual ad viewability. The confusion seems to be that as TV's advertising dollar growth slows, that this, somehow, indicates a declining interest in TV by the public and, therefore, by advertisers. Yet TV viewing is at all time highs and is growing slowly but steadily. And advertisers---branding advertisers ----are not exactly stampeding away from TV. Rather, they are obliging the networks, syndicators and cable channels to price their rating points more in line with economic growth. So ad spending has, indeed slowed down, but mainly for the broadcast TV networks, not cable. How will the broadcast TV networks respond? Since they make most of their profits via the cable channels they own plus their TV and radio owned-and-operated stations ( O&Os ), they will probably continue to use their network operations as "loss leaders" and accept a modest downward ad dollar flow in this particular venue as it supports their other cash cows----cable and the stations. How? That's simple. Network programs provide about 70% of the audience tonnage for the TV stations owned by the networks, which earn "spot" dollars from national and local advertisers, plus garnering lucrative re-transmission fees from cable and satellite providers. As for cable, it is estimated that approximately 40% of the GRP tonnage on basic cable is derived from 'off-network" syndicated rerun fare. So this is another reason for the networks continuing to operate in their current manner. They are the keystones in an extended new program supply chain that supports other TV platforms ---and draws in billions of ad dollars that might not be there but for the availability of the reruns. As we explain in our annual, TV Dimensions 2015", one way or another, the broadcast networks share in the resulting profits. Don't count them out so easily.