April is the month when television executives make their respective cases for bigger budgets, and cable networks are trying to close the gap in ad pricing that has long existed between cable and broadcast, where there’s a 3 to 1 advertising rate gap between broadcast and cable. Cable takes in more total ad dollars, but their rates are lower than broadcast TV’s. Because broadcast television still reigns in terms of ratings, many low-rated shows on broadcast TV get considerably higher cost-per-thousand-viewer ad rates than comparable cable shows.
And then there’s the new player that could disrupt the entire video apple cart: online video. Online video outlets like YouTube command nowhere near the advertising rates TV does, but changes in viewer habits (i.e. viewers who are becoming increasingly platform-independent) are changing things. In a few years, digital video advertising could bring in more ad dollars than television.
The Hollywood Reporter says that for the 2013-2014 season, ad-supported cable networks took in $10.2 billion in upfront commitments, which was a 4% increase over the previous year. In comparison, ABC, CBS, NBC, Fox, and CW captured $9.15 billion for 2013-2014. But while cable has been outperforming broadcast TV for ad dollars, increases in cable advertising intake are starting to level off. The top ad-supported cable networks for 2013, in order, are ESPN, USA, TNT, TBS, and Fox News.
Overall, advertisers spend $60 to $70 billion annually, including ads on broadcast, cable, local, syndication, and Spanish-language television. In 2012, online ad spending was around $36.6 billion, with $3.4 billion of that spent on mobile advertising.
An article in Variety reports that ZenithOptimedia, an ad-buying firm, predicts television’s chunk of global ad spending will fall to less than 40% by 2016. In the early decades of broadcast television, broadcasters only had each other to compete with for ad dollars, until cable became ubiquitous. And now, digital video is shaking things up once again. So far in 2014, advertisers are showing increased comfort with putting their ads in all types of video on every platform, so the dynamics of the advertising market are undergoing considerable changes. Rather than a television ad marketplace, the new normal is a video ad marketplace.
Television will have to become more flexible to maintain healthy advertising levels, and many networks are trying new things to draw in younger viewers who are far less tethered to television than older viewers. Tactics may include “micro-video” teasers aimed at younger viewers, and advertising deals that weave product placement into shows while creating complementary promotional videos.
Cross-Pollination Between Television and Digital
Broadcast, cable, and digital are all still very much siloed in the upfront song and dance. But now the digital folks have NewFronts, a similar setup where digital videos compete for TV dollars during the upfront negotiations. At the same time, traditional TV networks like CBS, Unavision, and The Weather Channel are choosing to join online giants like YouTube in NewFronts in an effort to be seen as legitimate digital companies. Advertisers have been shifting money into digital video for years, but television still reigns supreme. That, however could change within five years.
Digital to Television: Takeover or Merger?
Today, ad buyers are purchasing advertisements to appear not on TV “shows” but TV “content,” which is streamed on multiple platforms. Ad buyers are moving toward a future in which they can reach consumers regardless of what screen they happen to be using. Some media experts believe that digital video ads will take more ad spending away from print, outdoor, and display ads than from television.
A report by eMarketer says that digital advertising will overtake television advertising in 2018. Right now, marketing specialists still believe that television commercials influence audiences more than other ads, but digital giants like Google are working hard to convince ad buyers that the money they spend on TV gets a better ROI online. We’ll have to wait a few years to see if they were able to make their case.
As a digital publisher, you have to know where to spend your own marketing dollars, and how to bring in marketing dollars from others, including advertisers that currently spend on television. Knowing the trends and changes happening as digital video grows in importance can help you create the smartest strategy for marketing and monetizing your site.