Commentary
The Death Of TV Ads
- by Kaila Colbin , Featured Contributor, December 4, 2020
After literally decades of growth, global newspaper ad spend was nearing $125 billion in today’s dollars, second only to television and more than magazines, radio, and outdoor combined.
2007 was the year newspaper ads died.
Most of them didn’t know it yet, of course. But, in the following two years, newspaper ad spend plummeted by around 24%. Then two years of slight increases… and then more plummeting. And more. And more.
What destroyed newspaper ads, of course, was search. Google was nine years old, hitting its stride as a media company. Although search spend -- around $20 billion that year -- may not have seemed significant enough to threaten the newspaper titans, the rate of growth should have tipped them off that something big was happening.
Today, newspaper ad spend sits at around a quarter of what it was at its peak, having effectively swapped places with search, which pulled in around — you guessed it! — $125 billion last year.
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Yeah, yeah. You know that story. Old one.
But pay attention: The exact same thing is playing out between TV and social.
In 2007, TV was king of the mountain, pulling in around $170 billion a year, while Twitter had only just been founded, Facebook had only just opened up to the general public, and YouTube had only just been bought by Google. Social didn’t even exist as a spend category.
In the ensuing years, save a dip for the GFC, TV continued to climb, hitting $217 billion in 2014. That year, spending on social was still small at $25 billion. But it was following the same hockey-stick trajectory that search had seven years earlier.
2014 was the year TV ads died.
Most of us don’t know it yet, of course. TV ad spend pulled in $160 billion this year. It’s still the largest single category of advertising globally, by a lot.
But if we’ve learned anything from the saga of the newspapers, it’s that trajectories are more important than any particular point in time.
In the past six years, while TV spending dropped by more than a quarter, social media spend has nearly quadrupled. Online video, which accounted for just $9 billion in ad spending in 2014, has more than quintupled since then.
The most commonly cited reason for this is targeting: TV is a “spray and pray” medium; digital is precise. Doesn’t matter how random your business is. Want to sell costumes to furries? You can find them easily on social: not a dollar of your ad spend is wasted.
The arguments about the benefits of social are valid. But they neglect an equally important argument: the downsides of television.
As NYU professor Scott Galloway wrote recently, “Viewers are catching on that advertising is a tax on the poor/lazy and can be evaded via subscription. And advertisers are flocking to digital products that offer more precise targeting and measurement. CNN is only able to garner 23 cents per viewer per hour interrupting Fareed Zakaria with constant reminders that getting old sucks. The cable bundle is built on the assumption that your time is worth less than $1/hour.”
Newspapers survived the death of their primary source of revenue by changing business models. The New York Times switched to a digital subscription model, and shares in the company went from $4 in 2009 to more than $46 today. It is possible to come out the other side.
But in order to do that, you first have to accept that this side is done. If you don’t kill the caterpillar, you don’t get the butterfly.
Time to kill the caterpillar.
Kaila---not another "TV" is dying piece---I hope.
My main reservation concerns the comments being made by professor Galloway about the impending demise of cable and, with it, "TV" coupled with his embrace of streaming as the only viable business survival path for major TV entities---because they are losing their ad revenues at an alarming pace ---according to him. The problem, here, is that "TV" is not just "linear TV" anymore. Now, it includes, OTT, SVOD, AVOD, TV network, cable channel and station websites, and digital video venues such as YouTube. All of these, together, now constitute "TV". Also, new ways of buying "linear TV" are finally surmounting some major difficulties and are set for expansion---"addressable TV" being the main one. As for business plans, it should be clear---even to professor Galloway---that the major TV programmers are moving aggressively into the streaming space and bringing with them huge amounts of valuable fare whose costs are largely amortized by "linear TV" ad dollars. Moreover, most futurists ---including ourselves at Media Dynamics Inc.---expect that "pay TV" will still have about 50-60 million subscribers by 2025---not zero---and that this base, coupled with about 15-18% of the country which will be getting over-the-air reception from broadcast TV--will continue to provide a substantial ad revenue base to support TV's expanding SVOD/AVOD ventures. So by 2025, a typical TV network will be earning ad incomes from its reduced but still viable "linear TV" home base, plus its AVOD services and "digital ad sales" via its websites. In addition, the same TV network will be garnering reduced but significant retransmission fees, and it will also be collecting SVOD/AVOD subscription fees. Last but not least, the TV network will continue to share in the syndication profits of many of the prime time shows it launches on its "linear TV" or SVOD/AVOD platforms. That's a lot of income sources---a far cry from the situation in the 1980s when the networks were 100% dependent on ad revenue. So the sky is not falling on "TV" and the networks, along with their Hollywood partners, are making exactly the kinds of moves ----perhaps, somewhat belatedly----that will ensure future business success---providing they execute their plans intelligently and are willing to modify them as events dictate. Which means that advertisers will still have plenty of eyeballs to buy for their ad campaigns---but these will no longer be exclusively "linear TV" eyeballs.
You're absolutely correct, Ed. It's not that TV is dead, it's just that linear TV is morphing into TV content being delivered in a variety of new technically-enabled ways. As an analogy, no one said TV was dead when it moved from over-the-air transmission to cable / satellite reception
Newspapers didn't die just because of search. They died from incompetent management and bleeding themselves dry via executive pay. But the horrid management covers a lot and didn't start in 2007. I lived it.
You can't compare newspapers demise with any other media. Here are a few reasons why:
Newspapers unique problems
1. Loss of paying subscribers
2. News content became immediate not next day's edition
3. 25%+ was classified ads
4. Real estate ads were mostly exclusiviely to newspaper
5. Lega advertising was newspaper based
6. Last, but not least, was the absolute arrogance of the newspaper industry. No one felt sorry for them.
I'm so old that I recall the death of radio. Except it never happened.
John, actually it is true that the radio America knew in the 1930s and 1940s did disappear very quickly once TV established itself and demonstrated that it could garner huge audiences not only in prime time but also in the daytime and early evening hours. It took about five years for the latter points to sink in but once that happened virtually all of radio's program content ---with most of its sponsors---went up in smoke. Luckily for radio, more and more cars were being equipped with radios in the mid- to late- 1950s and transistor radios as well as other portable devi(ces allowed the medium to capture massive out-of-home audiences for the first time. Meanwhile, the programmers regrouped around various music formats, all-news and so-called "middle of the road" concepts---usually a mix of music and chatter. In the early 1960s Nielsen quietly bowed out as its in-home meter panel could not capture OOH listening, but along came The American Research Bureau (later known as Arbitron )with its personal diaries which could do that and soon radio was off and running again---not with big primetime entertainment shows, daytime soaps, kid shows, etc. as before, but with background music, short news flashes, sports and talk formats. In short, it morphed into something quite different by not trying to compete directly with TV.
I've read this same article going on ten years now. Perhaps one day soon it will be true. Comparisions to newspaper are not helpful, particularly since we know that video is the most effective form of creativity, and no one ever said that about newspaper. And that more people than those in the market right now seeing an ad are actually not "waste" at all--they are critical to your future sales and brand growth. Lastly, more people are watching traditional tv right now, at this moment, than any other medium, and it's still not close.
Broadcast and cable networks only have themselves to blame. Younger viewers (older viewers too) are ok with ads - but whoever thought 20+ minutes of ads per hour would be tolerated by anyone should have been fired more than a decade ago when the practice began. Whether it was pomposity of product or an ignoring of digital's potential, it was a terrible idea.
The next, and perhaps final, wave will be individuals offering content with product placement/promotion. People are dropping their $75+ month cable bills but are only going to tolerate so many subscription services. Netflix and YouTube premium will only cost you $25 a month combined with new content provided on an hourly basis.
My parents are almost 80 years old and outside of live sports/events, they haven't watched Broadcast or Cable TV in 15 years. Ratings are a fraction of what they were 20 years ago, yet TV commands high CPMs with diminishing returns.
This "correction" is long overdue.
Dan raises an important point--about rising ad clutter on TV.This is a function of two things. One, is the need of the sellers to generate GRPs to sell when their average ratings are declining due to rating fragmentation. The second motivation is the stupidity of advertisers who insisted on the sellers pricing "15"s at half the price of "30s" starting about 25 years ago --just as they did in the 1960s and 1970s when "30s" replaced "60s" as TV's basic ad unit. Yes, the shorter messages held the line on CPM hikes for a number of years but did anyone think---or care---about the inevitable result, namely that the number of distinct ad messages would rise dramatically with the advent of shorter commercials?Of course not.
So, yes, TV has a commercial clutter problem. However that is hardly the only reason for cord cutting nor the rise of Netflix and company. Why? Because people can simply leave the room or otherwise avoid ads if they wish to. TVision tells us that the average TV commercial is currently noted---eyes-on-screen for two or more seconds---by 40% of the program audience---which is a far cry from zero. Also, the percentage of folks using over-the-air reception to get broadcast TV has risen to 14% from only 8-9% some years ago---so these people seem to value the fare---especially news and sports----that TV offers---despite the heavy dosage of ads.
A lot of factors account for cord cutting. Some of them are purely economic----some homes are just strapped for money. Others like the "on demand" function offered by Netflix and others don't find much content of value on broadcast TV and, to a lesser degree, on cable. But, the evidence also tells us that a lot of people are not so put off by the amount of time devoted to ads on TV as is supposed---in fact, many of these heavy viewers---or TV fans---find commercials amusing and/or informative---and they not only watch them but are influenced by them. Which is why cord cutting is expected to level off with about 40-45% of all homes continuing with "pay TV" five years from now.
Indeed, TV by another name is still TV. I doubt that people are going to evolve from watching dramatic, comedic and news programming to solely following Instagram feeds. Also not quite settled is the ultimate triumph of the subscription model, judging by the fact that Netflix still spends far more than they take in every year.