A research firm which counts US ad spend, put out a report this week which effectively says that advertising is shrinking, not growing. The report from Standard Media Index (SMI) claimed that 2016 ad spend grew by 4.3% for Q4 and 6.8% for the entire year, but if you take out the Olympics and the US election, it said growth was a fall of 0.8%.
However, the SMI report focused mostly on digital ad spend and which has seen phenomenal growth of 19% CAGR, which was accelerating until 2015, but which slowed to only 13.3% in 2016 as Telecoms companies began to feel the pinch from a saturated US market, which saw their ad spend fall to single figures. SMI describes this as a “major speed bump.” Many advertisers dumped digital plans and slid back towards conventional TV, due to disappointing results with digital.
Retail, Telco’s and Consumer Electronics were among those segments which have moved back to TV and retailers, in particular flooded back to TV. And when you take out the sales of Facebook and Google from the rest of the digital sector, growth is just 8.7% SMI said.
Facebook ad space jumped 83% for the year and another star, Snapchat saw 356% growth in 2016, well ahead of Pinterest.
Across the board, US TV saw a 2016 4.4% increase in spend. But the story is complex and Broadcast was only up due to large rises around live sports and without it TV in total only grew 1.4% with Cable up 3.9%, but Broadcast actually down 2.4%. Sport revenue grew 16% due entirely to the Olympics, and news grew 14.1% thanks to the election.
So, in effect, live sports accounted for 3% of the entire TV market’s 4.4% growth during 2016 – it has always been obvious that live sports are essential to the prolonged existence of cable and broadcast TV, but being responsible for almost 70% of the market’s growth in annual ad spend came as a particularly surprising takeaway from SMI’s findings.
NBC was up 20% in 2016 mostly on that Olympic coverage and showing more NFL games, while CBS grew by 3.2%, ABC fell 2.2% and Fox fell off a cliff down 4.6%. In Cable ESPN fell 2.9% mostly due to it losing so many viewers.
During Q4, Magazines (down 7.2%), Newspapers (off 19.9%) and Radio (a mere 1% down) all lost revenue compared to 2015, while outdoor rose.
This begs the question of how catastrophically the collapse of the TV market will be once a migration of live sports to OTT sweeps across the US, and how prepared the industry players are for this inevitability?
NBC’s Sunday Night Football contributed the most sizeable chunk of ad dollars during the month of December. A single 30-second ad spot cost $614,972 during a Sunday night NBC NFL game, a 6% growth in unit cost from the previous year – helping to boost NBC’s overall growth by 16.6% in the month. Even the lowest ad spot, CBS’ Sunday afternoon NFL games, had a 4% year-on-year rise to reach $406,405 a unit.
The entirety of Q4 2016 paints a different picture, however, as the broadcast TV market fell 2.2% in the quarter, but still a vast improvement on the 12% shrinkage it saw in Q1 2016, while cable grew ad spend by 7.4% in the period, compared to a 1% growth the year before. This quarter has the honor of showcasing the Super Bowl, so naturally these figures should soar.
Circling back to the NFL and its importance to the US advertising market – Verizon has the NFL streaming rights for smartphones and we’d be intrigued to compare ad spend figures from this to those of cable and broadcast networks, if only they were given out.
Comcast signed a contract with Fox Sports this week to live stream in-market NFL games as of mid-February, and CBS struck a multi-year deal for NFL streaming rights on its OTT service All Access in early December. It was not made clear how the CBS deal ties in with Verizon which owns exclusive mobile streaming rights, so the case may be that CBS All Access subscribers cannot stream NFL games on mobile devices, but can do so on other hardware formats.
Verizon also lost streaming rights for Thursday night NFL games to Twitter back in April, but again this does not include mobile streaming. The CBS deal represents the NFL applying further pressure on Verizon to pay more to renew its rights deal.