Decline in Television Advertising

RECENT NEWS
Benzinga  Aug 3  Comment 
The advertising dollars flowing to Internet seems to be taking a major toll on traditional media companies whose mainstay is advertising revenue. BTIG analyst Rich Greenfield was on CNBC Monday to discuss how the decline in TV advertising and the...
guardian.co.uk  Jul 27  Comment 
TV ads grew 11.5% year on year but newspapers and publishers report slowest growth in digital ads on record and decline in spending of 6.8% across industry UK advertising spend reached £4.7bn in the first three months of 2015, a record for the...
Financial Times  Jul 7  Comment 
Spending surge contrasts with belief marketers have shifted spending away from medium
TechCrunch  May 19  Comment 
 Ad measurement startup iSpot.tv announced this morning that it has raised $21.9 million in Series B funding. The company says it knows exactly where and when national TV ads are running, and can therefore determine when those ads drive consumers...
MarketWatch  May 12  Comment 
AOL Inc. was coveted by Verizon Communications, not because of its Internet properties such as Huffington Post, but because it was seen as a path to the future of TV advertising.
Benzinga  Mar 31  Comment 
Some investors have heard of "programmatic advertising" as the future of the television advertising business, but many don't know what the term means and how it could change the world of advertising. Here's a breakdown of what programmatic ads...
Wall Street Journal  Mar 29  Comment 
Google Fiber may help the search giant break into the lucrative world of TV advertising. But significant hurdles remain.
The Australian  Jan 27  Comment 
THE sales boss of Seven West Media has attributed slowing ­demand for TV advertising to a cyclical downturn.
Financial Times  Jan 4  Comment 
When TV ratings look bad, just claim they are wrong
New York Times  Dec 17  Comment 
Mr. Rich’s whimsical and sardonic commercials for clients like Alka-Seltzer helped introduce a more freewheeling approach to TV advertising in the 1960s.




 
TOP CONTRIBUTORS

Over the past several years, growth in the $70 billion television advertising industry, a major source of revenue for firms ranging from cable companies to TV stations, has been declining.[1]On one level, the trend is part of a more general advertising slowdown that has also affected industries such as print media and outdoor advertising. With many major advertisers, particularly in the automotive industry and financial services, falling on hard times, advertising spending is rising slowly, if at all. Factors specific to the television industry, however, have also contributed to this weakness - audience fragmentation decreases the value of each TV spot. At the same time, the rise of digital advertising media (the Internet, cell phones, mp3 players, etc) gives companies cheaper, more convenient alternatives. While cable and broadcast advertising remains a large part of total ad spend - about 25% - 2007 growth rates in all types of television advertising remained at 1% or less, often entering negative territory (see chart below). Internet companies and those television industry firms that have embraced the opportunities offered by the internet benefit from this trend; however, traditional television companies that depend on advertising revenues will see profits suffer if these trends continue.

Image:TV4.jpg[2]

Business Drivers

Audience Fragmentation

With the proliferation of cable, broadcast, and satellite channels, video-on-demand, and various digital video recording devices such as TiVo (TIVO), television audiences are becoming increasingly fragmented, with fewer viewers watching each program. For instance, satellite television services provided by companies such as The DirecTV Group (DTV) and EchoStar Communications (DISH) have gained market share rapidly over the past few years and are now used by 27.6% of US households, compared to 24% last year. Cable television, despite enjoying much higher penetration rates, has been losing popularity; it currently reaches 61.3% of households, the lowest percentage since 1990.[3] Such fragmentation can decrease the value of each advertising spot sold by broadcast, cable and satellite companies. The increasingly frequent tendency of viewers to pre-record programs and then fast forward through advertisements further aggravates this decrease in value.[4]

Weakness in Advertising Industry

Spending on advertising is highly correlated with general economic growth, which makes such macro factors as oil prices, the U.S. Housing Market, and U.S. Economic Cycles key influences on the advertising industry. Advertising spend in 2007 grew less than 1% over the previous year due to weakness in the housing market and growing fears of a recession. With the effects of the subprime crisis continuing to spread, 2008 may be another weak year. [5]

Image:Tv5.jpg[6]

  • Financial services Advertising: Companies in the financial services industry spend more on advertising than those in any other industry, accounting for 12% of total advertising spending. Although advertising in the financial services industry grew faster than overall advertising in 2007 (5% in the first three quarters), the continuing fallout of the subprime crisis has the potential to strongly decrease total advertising spending going forward.[7]
  • Automotive Advertising: The US automotive industry has posted weak results throughout the past several years, a trend that is likely to continue. Rising costs, particularly wages and benefits for the companies' unionized workers, coupled with falling sales and the success of more efficient foreign competitors like Toyota Motor (TM) and Nissan Motor (NSANY), are all taking their toll on General Motors (GM), Ford Motor Company (F), and DAIMLERCHRYSLER AG (DAI). [8]Consequently, the big three automakers have decreased their spending on advertising. GM, for instance, spent 22% less on advertising in the first three quarters of 2007 than in the same period of 2006; total automotive industry advertising fell 13.5%. [9]
  • Political/Issue Based Advertising: Political advertising has proved itself the one bright spot in the industry as the the 2008 presidential election approaches. With many states pushing up their primaries, the campaign ads hit the waves earlier this election season, raising political advertising in 2007 (traditionally, odd-numbered years are weak in the industry.) Additionally, a wide array of viable candidates is running, and, for the first time since 1952, it includes neither a sitting president nor a vice president. This makes competition more intense and makes it necessary for candidates to run more advertisements in order to make their names and policies known to voters. The resulting spike in political ads may soften the decline in television advertising in the short term, but its effect is unlikely to last beyond the election next year. [10]

Impact of Internet Advertising

U.S. advertising spending devoted to Internet advertising has increased rapidly over the past few years, growing over 21% in 2006 to reach 7% of total advertising spend. [11] In comparison, total advertising spend on broadcast television grew only 10% annually in 2006 and most other media saw only single digit growth. [12] The Internet offers advertisers a high level of flexibility in presenting their message to the consumer at a lower cost than traditional 30 second TV spots.[13]

The Writers' Strike

As the Writers Guild of America's strike drags on into its third month, it is beginning to negatively impact the television advertising industry, compounding its decline. With thousands of writers on strike, existing programs must be taken off the air and new shows in development must be pulled, further shrinking already decreasing audiences. As viewers leave television for new media (i.e. the Internet), advertisers follow. [14] And, after finding profitable advertising venues outside of traditional television spots, they may not return to television even when the strike ends.[15]

Positive Exposure

  • Internet Companies: Google (GOOG) and Yahoo! (YHOO) increased their internet advertising revenues by 107% and 95% respectively in 2006. These and other internet companies benefit from the decline in television advertising as companies look to their more innovative advertising options. [16]
  • Media conglomerates developing internet businesses: Media giants that are tackling the threat of losing audiences and advertising dollars head on may actually benefit from the decline in television advertising as it takes its toll on their less innovative competitors. News Corporation (NWS), for instance, made a big move into internet advertising by acquiring #1 social networking site MySpace in 2005. [17] Time Warner (TWX) is another media conglomerate that has positioned itself to succeed despite the decline of television advertising; it was the #1 company in internet advertising in 2006, receiving $8.7 billion in internet advertising revenues.[18]
  • Hearst-Argyle Television (HTV) has developed websites for each of its 29 stations, where it replicates much of its television content. The company also partnered with YouTube to broadcast on 26 of the site's channels last year, the first such alliance in the industry. [19]

Negative Exposure

Footnotes

  1. Thomasch, Paul. "Writers strike could mean big changes in advertising." Reuters News November 11, 2007
  2. Nielsen Media
  3. Satellite Takes Market Share from Cable in U.S. Pay-TV Market
  4. DISCA 2006 10-K Item 1 Business p.I-15
  5. Chaffin, Joshua. "US advertising faces 'another poor year'." Financial Times (FT.Com) December 4, 2007.
  6. Nielsen Media
  7. TNSE Media Intelligence Reports http://www.tns-mi.com/news/12112007.htm
  8. HTV 2006 10-K Item 1 Business p.12
  9. Nielsen Media
  10. Lowry, Tom. "TVs Boomlet from Election '07." Business Week, 3/5/2007
  11. AdAge 2006 Factpack http://adage.com/images/random/FactPack06.pdf
  12. Impact of Internet Advertising http://www.wikinvest.com/concept/Impact_of_Internet_Advertising
  13. Bulkley, Kate. "The digital persuaders." The Guardian 24 September 2007
  14. Thomasch, Paul. "Writers strike could mean big changes in advertising." Reuters News November 11, 2007
  15. Neff, Jack. "Ads That Leave Scripted Shows Might Not Return." Television Week, 12/10/2007
  16. AdAge 2006 Factpack http://adage.com/images/random/FactPack06.pdf
  17. News Corp Wikinvest Article. http://www.wikinvest.com/stock/News_Corporation_(NWS)
  18. AdAge 2006 Factpack http://adage.com/images/random/FactPack06.pdf
  19. Hearst-Argyle Television Wikinvest Article http://www.wikinvest.com/stock/Hearst-Argyle_Television_(HTV)
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki