The always informative Brian Wieser reported in his newsletter that “By the end of next year, it’s likely that only around 50% of households in the U.S. will have pay TV subscriptions
as we have historically known them.”
That’s bad news if you are in the linear TV or cable TV business. Cable companies and traditional TV networks draw income from subscribers to
their traditional offerings, as well as from subscribers to their owned-and-operated streaming platforms. Their second income source is selling ads on these options. A third revenue stream is the data
business that they create, just as retail media owners have discovered.
The challenge that linear TV operators and cable companies are facing is that audiences are not only cutting cords, but
also cutting platform subscriptions. This means that two of their main income sources are challenged. Smaller audiences mean less subscription income, and also mean they can’t sell as many ads
or can’t sell them at super premium prices. That’s a double-income whammy right there.
This in turn influences how much these companies can pay for content which (in part) explains
the current labor disputes between writers, actors and content creators. It probably also explains why Disney is thinking of selling its traditional TV assets such as ABC and/or ESPN. And it explains
why sports are migrating to streamers and owned-and-operated league platforms. The traditional broadcasters can’t afford the rights anymore – and longer term, it is doubtful that streaming
platforms will be able to afford them either,
These developments are equally challenging for marketers who depend on video advertising to reach consumers. I say “video” on
purpose, as the triple whammy of cord-cutters, platform-defectors and lighter ad loads means there are less video advertising audiences for sale across these channels.
The top TV ad categories
are the ones you see ad nauseam, such as automotive, insurance, pharmaceuticals, phone companies, fast food and politicians/issue campaigns. Notes Wieser: “As streaming services are
unlikely to be primarily ad-supported, and contain lighter ad loads when they do, accelerating cord-cutting in the US is set to permanently impair growth. In the most recent quarter I estimate
that US pay TV subscriptions -- including virtual MVPDs -- fell by 7.3% year-over-year, the industry’s fastest pace of decline ever.”
The alternatives are video reach on short form
platforms such as those from Meta, X, Alphabet and TikTok. These platforms are certainly growing in audience importance and ad loads. But they are very different in how they work. Watching a show or
sports event on your big screen at home is, despite the many distractions available, still a very impactful and often shared experience. Watching snackable clips on your phone from professional
content creators as well as homegrown or mom-and-pop creators is a very different experience. And your ad is viewed with the same level of attention and appreciation (or lack thereof) as the snackable
content is.
The impact of this type of advertising on consumer impact versus traditional TV/cable spots is not well understood. Thanks to organizations like EGTA, the U.K.s Thinkbox, the
Advertising Research Foundation and others, we know and understand a lot about the impact and strengths of the old TV world. But the new video world, and especially the combined old and new world, is
very much not understood. Let’s hope that advertisers will push as hard for understanding the new video world order as they did for the traditional model.