TV adspend to fall by $2bn in US

30 June 2009

LOS ANGELES: Television companies in the United States should brace themselves for a $2 billion (€1.42bn; £1.2bn) fall in cable and broadcast ad revenues over the next four years, says a new report from media researchers Screen Digest.

The Global Media Intelligence study predicts income from broadcast and cable TV advertising will fall from its $69bn level last year to $67bn in 2012, as marketers' faith in the medium continues to be undermined by ad-skipping technologies and younger consumers' migration online.

And although the same study tips online video advertising to triple in value over the same period, it won't be enough to compensate fully.

The growth of web-based TV viewing offers some hope to the industry but, since its current value of $448m accounts for little over 2% of current TV advertising, even its forecast three-fold expansion to $1.45bn in 2013 is insufficient to plug the expected $2bn hole in traditional revenues.

"We're at an inflection point in the TV business model," said Screen Digest's, Arash Amel, one of the report's authors. "Online video is not mature enough and won't mature quickly enough to fill the gap left by the decline of traditional TV advertising."

Longer-term, however, he was more upbeat for the prospects of companies willing to invest in business models supported by online content. "There's no reason why online video won't make up the shortfall within five years. But the question is how aggressive the networks in the US and the rest of the world are prepared to be," he pointed out.

The predicted continuance of the boom in online video was sparked three years ago when ABC started offering full versions of its shows online, prompting rivals such as Fox, NBC and CBS to do the same. Between them, the major networks now account for more than 50% of the online video advertising market in the US.

Upbeat industry observers also look to the UK where the BBC's iPlayer online viewing service, albeit non-commercially funded, has been a runaway success in terms of take up.

But an obstacle remains to securing sufficient revenue from advertising-funded online content, which might only run half a dozen ads over the course of an hour, compared to the broadcast average of closer to 20.

Data sourced from Financial Times; additional reporting by WARC staff