Meanwhile, linear TV viewing is declining at a significant rate. Also according to Nielsen data, viewing of ad-supported cable TV and English language broadcast TV is down 9% year over year.
Some might see this as a simple transference of viewing from one type of service -- pay TV from cable and satellite services -- to a new kind of service: pay TV from Netflix, Amazon Prime and Hulu.
But it’s not that simple. There's at least one enormous difference: While the vast majority of the streaming video viewing today is ad-free, all of the linear TV viewing that went away was loaded with ads.
To put the differential “ad load” into perspective, national cable and broadcast TV in total last year delivered 19 trillion ads to persons two and older (P2+ in TV media jargon), according to Kantar data. A nine percent loss in viewership means that almost 1.9 trillion 15- and 30-second video ads went away in a year. They just disappeared.
Any way you look at it, that’s an enormous amount of lost advertising opportunity. If you assume that future linear TV decline occurs at a similar rate -- a reasonable assumption, I think -- you would see the evaporation of one-half of all of TV’s ad impressions in five years: 9 trillion! That kind of loss will have enormous repercussions across the advertising and media industry.
Who will win?
For sure, Netflix and Hulu will win. They will keep winning as long as they are able to keep growing and not lose too much share to new entrants.
Amazon will win for sure, since more streamers will mean more and more consumer lock in to their free delivery service. Plus, Amazon owns the fast-growing Twitch streaming service, which does contain ads, and can serve as a complimentary ad-supported video platform.
Video content creators will win, as long as the market is expanding, since each of the services will be in an “arms race” to outdo each other, at least for the next five years, when streaming services’ growth will slow and those companies will have to normalize their business models for profitability.
Who will lose?
TV networks will be in a tough spot. By losing both viewers and ad avails, they lose revenue on both sides of their business: carriage fees and ad revenue. While most TV companies are changing operating and cost structures quickly, they are probably not changing them quickly or dramatically enough to make it to the other side profitably enough.
They certainly won’t make it unless they massively change how they price, package and sell ads, since they will need to make three to five times more revenue per impression in the future to support the kind of profitability that their investors have enjoyed.
Viewers are likely to lose. Yes, advertising can be an annoyance, but it pays for a lot of free content that may not be available in five years. Think news programming, for example. Advertising helps inform people of products or service they might like but don’t know about. Fewer ads mean fewer chances for that serendipity.
Also, if retailers become the biggest media owners -- think Amazon -- they might not have the incentives to want their audiences to know about products other than those they carry.
What do you think? Who wins and who loses when 9 trillion TV ad impressions a year disappear?