‘We believe that online and digital advertising is beginning to take some share from the largest ad bucket—national TV’
—Michael Nathanson, analyst
http://www.wsj.com/articles/tv-ads-sales-on-s...1415222019
Media & Marketing
TV Ad Sales on Shaky Ground
Evidence Is Mounting of a Structural Slowdown as Spending Moves to Digital
Nik Wallenda’s tightrope stunt Nov. 2 on the Discovery Channel, whose parent cut the outlook for revenue ENLARGE
Nik Wallenda’s tightrope stunt Nov. 2 on the Discovery Channel, whose parent cut the outlook for revenue Jean-Marc Giboux/Discovery Communications
.
By
Keach Hagey and
Suzanne Vranica
Updated Nov. 5, 2014 4:52 p.m. ET
5 COMMENTS
Third-quarter results at big U.S. media companies are pointing to an ominous trend: The television ad market is on shaky ground—especially in cable—as marketers pull back amid economic uncertainty and shift dollars to digital outlets.
Time Warner Inc. on Wednesday said domestic advertising revenue at its Turner Broadcasting cable networks, including CNN, TBS and TNT, was flat. Discovery Communications Inc. on Tuesday said advertising revenue at its domestic cable networks grew a smaller-than-expected 1%, one reason the company cut its revenue guidance for the year. And last month, Comcast Corp. ’s NBCUniversal’s cable-TV unit reported a 4.6% decline in ad revenue.
.
Ever since the weak advance selling season in the spring, known as the “upfront”—when cable ad commitments for the 2014-2015 TV season slipped about 6%—media executives have been telling Wall Street to be patient, arguing that advertisers would open their wallets later in the year. But with each passing month, evidence is mounting of a more structural slowdown.
Marketers including Allstate Corp. and Mondelez International Inc. have begun speaking openly about shifting TV ad dollars to digital platforms.
ENLARGE
.
Analysts are now dialing back their growth expectations for the full year. Michael Nathanson, an analyst at MoffettNathanson, said he is “less optimistic” that all the money marketers held back at the upfront will come back in the remainder of the year through the “scatter” market, where ads are purchased close to air date.
MoffettNathanson is now predicting that overall cable network ad dollars will grow only 3% this year versus its earlier forecast of 6%. It also ratcheted down its forecast for ad spending at the broadcast networks this year, now predicting a 3.9% increase versus the 5% projected back in May.
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The poor ad market trends feed into broader concerns about the health of the TV business. If the advertising market stays soft, TV networks will face more pressure to raise the subscription fees for their channels. Pay-TV operators fear those rising costs could encourage consumers to “cut the cord,” quitting their subscriptions, and damaging the entire TV ecosystem.
Not every cable channel or media company is feeling equal pain. One outlier among major media companies thus far has been 21st Century Fox, where domestic ad revenue grew 10% at its cable channels in the latest quarter. But Fox’s broadcast-TV ad revenue fell 5%. (21st Century Fox and Wall Street Journal owner News Corp were part of the same company until mid-2013.)
‘We believe that online and digital advertising is beginning to take some share from the largest ad bucket—national TV’
—Michael Nathanson, analyst
.
Media and ad industry executives disagree on the underlying cause of the slowdown. Cable ratings have been particularly bad lately, down 8% in the third quarter among adults 18 to 49, according to a MoffettNathanson analysis of Nielsen data. As eyeballs move to digital channels such as online video and social media, are some advertisers targeting them with ad dollars previously earmarked for TV? Or are brands simply waiting to spend their TV budgets later in the year?
“We believe that online and digital advertising is beginning to take some share from the largest ad bucket—national TV,” Mr. Nathanson said.
Media company executives have stuck to a message that the ad slowdown is mostly due to advertisers wanting flexibility to buy spots at the 11th hour.
“There is clearly a shift to digital,” NBCUniversal CEO Steve Burke said on a call with analysts last month. Still, he said “tentativeness on the part of advertisers” was the cause for the weak upfront.
“There is no question that advertisers are holding their wallets closer, even on the movie side, and coming in in late bursts,” said Discovery Communications CEO David Zaslav. “Our sense is it’s a little more cautiousness about how to deploy capital.”
Chase Carey, 21st Century Fox’s chief operating officer, said the television ad market’s weakness “is primarily the economy,” which is “leading businesses to buy short-term or keep the money in their pocket.”
Ad buyers acknowledge there is a bigger pullback in spending in some key categories such as automotive, consumer products and electronics, but they are quicker to highlight the shift of dollars to digital as a real trend.
“Money is definitely moving to digital channels,” said Andy Donchin, chief investment officer of Amplifi, a media buying arm Dentsu.
Insurer Allstate said from 2013 to 2015 it will have shifted about 20% of its TV ad dollars to digital advertising. Food conglomerate Mondelez said it shifted some dollars to online video to find younger consumers that are watching less TV.
Ad giant Omnicom Group said last month that it is advising its clients to shift 10% to 25% of their TV ad dollars to digital, although it said a “significant” portion of those dollars are returning to traditional media companies that put their premium video content online.
Some ad buyers say that cable networks seem more vulnerable to the digital shift than broadcast, partly because many cable companies are dedicated to reaching a particular niche audience segment and that can be done more efficiently online.
Broadcasters, they say, are somewhat less affected because they still can provide the biggest reach when advertisers are looking to increase brand awareness quickly.
“Cable is all about segmentation, finding the right audience, at the right time. Digital is that on steroids,” said an ad-buying chief.
CBS Corp. on Wednesday said content-licensing and subscription fees helped the entertainment unit that includes the CBS network increase revenue 1.4% to $1.91 billion, but the broadcaster noted that was partially offset by softness in the ad market. CEO Les Moonves said advertising “is growing again” in the fourth quarter and that broadcasters have a leg up. “Basic cable is not doing as well,” he said. “Any share shift to digital is coming from basic cable and print.” CBS also announced plans to offer a standalone streaming service for pay channel Showtime next year.
Jason Kanefsky, executive vice president of strategic investments at media buyer Havas Media, said advertisers still need to buy time on high-rated cable programs, but can cut down on lesser-watched programs and cable networks. “I can take that same money and put it into retargeting online ads or social media, where you can target people when they are closer to purchase,” he said.
Over the past year, online video outlets such as YouTube and AOL have targeted some of the ad dollars that normally flow to cable channels, ad buyers said, by making ratings comparisons between their audiences and those of cable TV networks. Digital companies also elected to sell ad inventory using TV-like measurements, which ad buyers says has helped to woo TV dollars.
Some media executives are still holding out hope that the holiday season will bring a last-minute surge in advertising spending to at least partly offset the year’s weakness.
But others see a sustained decline in ratings—a new normal. “I think the fact of the matter is the next 5 to 10 years in basic entertainment cable, as it relates to ratings, are going to be much more difficult than the last 5 to 10 years,” Mr. Burke said.
Write to Keach Hagey at keach.hagey@wsj.com and Suzanne Vranica at suzanne.vranica@wsj.com
Let's hope, after the Dow Jones hit a new high, that some of these ad Dollars are coming back. The same networks are on the receiving side, it just seems like currently more jobs are outsourced and there is more PR and Product Placement than Classic Advertisements. Also New Media still does not demand the rates, classic Media did. I can see the effect #StockFootage and #Acting Industry.
Michael Zambardino
Michael Zambardino
Nov 6, 2014
TV is really loosing ad dollars because digital platforms can target a more accurate audience. There is more value in buying digital ad's. The ad's can be configured to be flexible and efficient to reach a designated group.
GUY WERNERMichael Brogan
—Michael Nathanson, analyst
http://www.wsj.com/articles/tv-ads-sales-on-s...1415222019
Media & Marketing
TV Ad Sales on Shaky Ground
Evidence Is Mounting of a Structural Slowdown as Spending Moves to Digital
Nik Wallenda’s tightrope stunt Nov. 2 on the Discovery Channel, whose parent cut the outlook for revenue ENLARGE
Nik Wallenda’s tightrope stunt Nov. 2 on the Discovery Channel, whose parent cut the outlook for revenue Jean-Marc Giboux/Discovery Communications
.
By
Keach Hagey and
Suzanne Vranica
Updated Nov. 5, 2014 4:52 p.m. ET
5 COMMENTS
Third-quarter results at big U.S. media companies are pointing to an ominous trend: The television ad market is on shaky ground—especially in cable—as marketers pull back amid economic uncertainty and shift dollars to digital outlets.
Time Warner Inc. on Wednesday said domestic advertising revenue at its Turner Broadcasting cable networks, including CNN, TBS and TNT, was flat. Discovery Communications Inc. on Tuesday said advertising revenue at its domestic cable networks grew a smaller-than-expected 1%, one reason the company cut its revenue guidance for the year. And last month, Comcast Corp. ’s NBCUniversal’s cable-TV unit reported a 4.6% decline in ad revenue.
.
Ever since the weak advance selling season in the spring, known as the “upfront”—when cable ad commitments for the 2014-2015 TV season slipped about 6%—media executives have been telling Wall Street to be patient, arguing that advertisers would open their wallets later in the year. But with each passing month, evidence is mounting of a more structural slowdown.
Marketers including Allstate Corp. and Mondelez International Inc. have begun speaking openly about shifting TV ad dollars to digital platforms.
ENLARGE
.
Analysts are now dialing back their growth expectations for the full year. Michael Nathanson, an analyst at MoffettNathanson, said he is “less optimistic” that all the money marketers held back at the upfront will come back in the remainder of the year through the “scatter” market, where ads are purchased close to air date.
MoffettNathanson is now predicting that overall cable network ad dollars will grow only 3% this year versus its earlier forecast of 6%. It also ratcheted down its forecast for ad spending at the broadcast networks this year, now predicting a 3.9% increase versus the 5% projected back in May.
Advertisement
The poor ad market trends feed into broader concerns about the health of the TV business. If the advertising market stays soft, TV networks will face more pressure to raise the subscription fees for their channels. Pay-TV operators fear those rising costs could encourage consumers to “cut the cord,” quitting their subscriptions, and damaging the entire TV ecosystem.
Not every cable channel or media company is feeling equal pain. One outlier among major media companies thus far has been 21st Century Fox, where domestic ad revenue grew 10% at its cable channels in the latest quarter. But Fox’s broadcast-TV ad revenue fell 5%. (21st Century Fox and Wall Street Journal owner News Corp were part of the same company until mid-2013.)
‘We believe that online and digital advertising is beginning to take some share from the largest ad bucket—national TV’
—Michael Nathanson, analyst
.
Media and ad industry executives disagree on the underlying cause of the slowdown. Cable ratings have been particularly bad lately, down 8% in the third quarter among adults 18 to 49, according to a MoffettNathanson analysis of Nielsen data. As eyeballs move to digital channels such as online video and social media, are some advertisers targeting them with ad dollars previously earmarked for TV? Or are brands simply waiting to spend their TV budgets later in the year?
“We believe that online and digital advertising is beginning to take some share from the largest ad bucket—national TV,” Mr. Nathanson said.
Media company executives have stuck to a message that the ad slowdown is mostly due to advertisers wanting flexibility to buy spots at the 11th hour.
“There is clearly a shift to digital,” NBCUniversal CEO Steve Burke said on a call with analysts last month. Still, he said “tentativeness on the part of advertisers” was the cause for the weak upfront.
“There is no question that advertisers are holding their wallets closer, even on the movie side, and coming in in late bursts,” said Discovery Communications CEO David Zaslav. “Our sense is it’s a little more cautiousness about how to deploy capital.”
Chase Carey, 21st Century Fox’s chief operating officer, said the television ad market’s weakness “is primarily the economy,” which is “leading businesses to buy short-term or keep the money in their pocket.”
Ad buyers acknowledge there is a bigger pullback in spending in some key categories such as automotive, consumer products and electronics, but they are quicker to highlight the shift of dollars to digital as a real trend.
“Money is definitely moving to digital channels,” said Andy Donchin, chief investment officer of Amplifi, a media buying arm Dentsu.
Insurer Allstate said from 2013 to 2015 it will have shifted about 20% of its TV ad dollars to digital advertising. Food conglomerate Mondelez said it shifted some dollars to online video to find younger consumers that are watching less TV.
Ad giant Omnicom Group said last month that it is advising its clients to shift 10% to 25% of their TV ad dollars to digital, although it said a “significant” portion of those dollars are returning to traditional media companies that put their premium video content online.
Some ad buyers say that cable networks seem more vulnerable to the digital shift than broadcast, partly because many cable companies are dedicated to reaching a particular niche audience segment and that can be done more efficiently online.
Broadcasters, they say, are somewhat less affected because they still can provide the biggest reach when advertisers are looking to increase brand awareness quickly.
“Cable is all about segmentation, finding the right audience, at the right time. Digital is that on steroids,” said an ad-buying chief.
CBS Corp. on Wednesday said content-licensing and subscription fees helped the entertainment unit that includes the CBS network increase revenue 1.4% to $1.91 billion, but the broadcaster noted that was partially offset by softness in the ad market. CEO Les Moonves said advertising “is growing again” in the fourth quarter and that broadcasters have a leg up. “Basic cable is not doing as well,” he said. “Any share shift to digital is coming from basic cable and print.” CBS also announced plans to offer a standalone streaming service for pay channel Showtime next year.
Jason Kanefsky, executive vice president of strategic investments at media buyer Havas Media, said advertisers still need to buy time on high-rated cable programs, but can cut down on lesser-watched programs and cable networks. “I can take that same money and put it into retargeting online ads or social media, where you can target people when they are closer to purchase,” he said.
Over the past year, online video outlets such as YouTube and AOL have targeted some of the ad dollars that normally flow to cable channels, ad buyers said, by making ratings comparisons between their audiences and those of cable TV networks. Digital companies also elected to sell ad inventory using TV-like measurements, which ad buyers says has helped to woo TV dollars.
Some media executives are still holding out hope that the holiday season will bring a last-minute surge in advertising spending to at least partly offset the year’s weakness.
But others see a sustained decline in ratings—a new normal. “I think the fact of the matter is the next 5 to 10 years in basic entertainment cable, as it relates to ratings, are going to be much more difficult than the last 5 to 10 years,” Mr. Burke said.
Write to Keach Hagey at keach.hagey@wsj.com and Suzanne Vranica at suzanne.vranica@wsj.com
Let's hope, after the Dow Jones hit a new high, that some of these ad Dollars are coming back. The same networks are on the receiving side, it just seems like currently more jobs are outsourced and there is more PR and Product Placement than Classic Advertisements. Also New Media still does not demand the rates, classic Media did. I can see the effect #StockFootage and #Acting Industry.
Michael Zambardino
Michael Zambardino
Nov 6, 2014
TV is really loosing ad dollars because digital platforms can target a more accurate audience. There is more value in buying digital ad's. The ad's can be configured to be flexible and efficient to reach a designated group.
GUY WERNERMichael Brogan
