Traditional TV Ad Revs To Sink 20% In 5 Years, AVOD Is Climbing

by Wayne Friedman , July 20, 2020

Looking beyond COVID-19 disruptions, total traditional TV advertising's steady $70 billion in revenue could sink by 20% -- or $14 billion -- over the next five years.

An MoffettNathanson Research estimate says much of this will come from cord-cutting, CPM inflation and rising advertising VOD services.

This year’s projection is total TV revenue will decline to $61 billion, drifting lower to $56 billion by 2024.

National cable networks will sink to 17% to $24 billion; local TV stations down 5% to $19 billion; national broadcast networks, 14% lower to $12 billion; local cable remaining the same, $4 billion and syndication falling 33% to $2 billion.

In five years -- 2024 -- cable TV networks will see the biggest decline in actual advertising dollars going down to $21 billion, with national broadcast networks roughly at the same levels -- $12 billion.

“This would represent the first period in time when there has been a long-term structural decline in the linear TV ad spending market,” says Michael Nathanson, senior research analyst for MoffettNathanson.

He adds ad-supported video on demand (AVOD) streaming services will grab these lost traditional TV ad revenues because it can improve TV’s reach in adding younger viewers.

Additionally, AVOD can ease cost per thousand viewer price inflation from mixing in lower CPM content. Also, AVOD promises better granular data in targeting audiences.

Estimates are AVOD will grow to nearly $14 billion by 2024 from around $3 billion in 2019.

advertising, avod, streaming, tv

2 comments about "Traditional TV Ad Revs To Sink 20% In 5 Years, AVOD Is Climbing".

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Ed Papazian from Media Dynamics Inc, July 21, 2020 at 12:24 p.m.
One thing that the forcasts seem not to be considering is the possibility that as the supply of "linear TV" GRPs shrinks, that the sellers will be able to significantly up their CPMs which are at a bargain basement level now---despite sharp increases in recent years. Last year we did an analysis weighting all TV spend ---by day part, network type and commercial length---and found that the average CPM for all viewers was around $16-17. In other words, advertisers are paying 1-2 cents per potential contact per viewer. That compares very favorably with other ways to contact consumers. If the average TV CPM were to double in five years---due to reduced availability of GRPs--- this, in and of itself, could offset losses in total viewing time caused by continued cord cutting and the diversion of viewing to streaming venues. You cant assume that TV CPMs will simply continue garnering modest 5-17% rate increases per year---as if no other considerations are involved. What if the sellers unite---as happened in the late 1970s and demand increases of 20-25% per year?Advertisers grumpled---but paid, then. Will they do the same in 2021-2025?
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Ed Papazian from Media Dynamics Inc, July 21, 2020 at 12:37 p.m.

Correction: I meant 5-7% rate increases, not 5-17% in the third from last sentence in my earlier reply.