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US TV ad volumes falling now, will fall faster later

A report out this week from eMarketer says that US TV advertising is declining and will continue to decline for years to come. Our only problem with it is that we don’t think the report goes far enough. A fall of just 0.5% is predicted for this year, and 1% the following year, followed by 0.5% in 2020.

There is, as usual, a belief that things will not deteriorate rapidly, something we attribute to a rigid belief in the status quo. The truth is that as more original content is created for OTT services, the divide between advertising on linear TV and the potential for a drift into digital and programmatic advertising, is getting bigger. Right now people do not know how to get the best out of digital advertising on OTT, but as tool become available to make this work for advertisers, linear’s decline will accelerate, not slow.

Right now issues of trustworthiness at companies like Facebook stand in the way of a dramatic shift in advertising and the problems associated with brand safety, but once those issues are sorted out, we could imagine 5% chunks of TV advertising falling away in a single year.

eMarketer says that TV ads in 2018 will slip $69.87 billion as TV’s share of total US media ad expenditures drops from 33.9% in 2017 to 31.6%.

A slight uptick predicted for 2020 is due to US presidential election and the Summer Olympics in Tokyo, but after that eMarketer agrees it will accelerate but do not provide numbers that far out.

Another significant change to watch for we believe is that overseas ad revenues will hold more firmly than the US, as US content cannot immediately disentangle from its licensing deals, which are mostly with other linear channels. Once that changes and overseas OTT begins to replace linear viewing, then this will have an effect on the US, as even less content is produced aiming for any kind of linear focus. If broadcast networks can sell their channels overseas they will remain resilient, but once that means selling content mostly to SVoDs, then they must rethink their focus.

Meanwhile digital ad spending in the US is rising, up 18.7% in 20187 to $107.30 billion while OTT platforms like Roku saw a 93% rise in its revenues to $293 million in 2017. Hulu will also raise its advertising as fast as its subscription revenues.

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