AVOD/Connected TV Ascendancy May Save Traditional TV
- by Wayne Friedman , June 10, 2021
Although TV revenue from new ad-supported VOD services will continue to sharply ramp up, the question is: Will it make up for losses over traditional TV advertising deals?
“Even though brand dollars continue to flow to TV despite lower available inventory, we believe ultimately the time will come when rising CPMs won’t be able to offset a falling volume of impressions,” says MoffettNathanson Research. “AVOD [advertising video-on-demand] services will need to become even more important contributors.”
Some of that activity is well underway, estimating that AVOD platforms of all types will hit $7.8 billion this year -- up 65% from $4.8 billion in 2020. This includes legacy TV company owned-platforms, including individual premium steamers, as well as non-owned platforms, such as Roku.
AVOD platforms in the first-quarter 2021 hit $1.26 billion -- up nearly 70% from the same quarter a year ago.
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Looking just at Roku, Tubi (owned by Fox Corp.) and Pluto TV (owned by ViacomCBS), this group collectively pulled in $493 million over the same first-quarter period. For the 2021 year, these three are estimated to get to $2.5 billion.
The good news in the near term: Post-pandemic, traditional, live-linear TV networks should see rising results -- 11% more for national broadcast networks to $14.8 billion this year and 4.5% more for national cable to $28.8 billion.
But MoffettNathanson expects traditional TV ad spend -- excluding AVOD -- to decline by $3 billion over the next five years -- going to $69 billion by 2025, due to sinking impressions.
In particular, cable TV networks might witnessed sharp impression declines, due to less interest in general entertainment, non-news focused content. Total time viewed (sans news content) for persons 2 plus, total day, in the Nielsen C3 metric, was down 9% from 2015-2019 to 3.5 billion minutes.
In the second quarter of this year, MoffettNathanson projects a 20% decline in total day, Nielsen C3 metric for persons age 2-plus viewers; a 25% drop in 18-49; and a 16% decline in those 50 years and older.
“Even older demos of people 50+ years old,
historically relatively stable consumers of television, are watching less cable TV.”
Likewise, broadcast networks are seeing sinking results, now projected to be down 16% in total viewers
in the second quarter. That's an 18% drop in 18-49, and 15% lost in those 50 and older.
Wayne, one of the reasons for the growing shortage of "GRPs" for "traditional TV" is that these are based on the outdated 18-49 or its sister conglomerate audience guarantee" demo" 25-54--in both cases accounting for a minority of the average minute TV audience. So, of course, as these heavily duplicated umbrella groupings are switching more of their TV viewing time to streaming their "linear" footprint is shrinking. But what about the majority of TV's audience---those aged 50+? They are reducing their time spent but at a far reduced pace yet the sellers get no credit for such viewers and the GRPs they could represent.
There are several solutions to this problem. First, the sellers---especially cable---will probably increase their commercial loads so they represent 32-35% of their content time. That will generate more 18-49/25-54 GRPs for advertisers---and there are many---who can't be bothered about whether their commercials are seen. The second solution is to find a way to build the 50+ group into the GRP audience guarantee system so it counts along with the current metrics. Maybe go only adults 18+ or go with two "demos 18/49/25-54 and 50+--- so if the latter delivers you aren't penalized so heavily for under performence by the former.