As the broadcast networks get set to begin their upfront presentations, a new report looks at why marketing spending is shifting from TV to the Internet right now.
Analyst Todd Juenger of Sanford C. Bernstein, points to three factors.
The first is the drop in viewership as reported by the ratings used to buy and sell advertising, which Juenger says is mostly because of streaming services such as Netflix. The shortfall has created a scarcity of advertising supply.
The second is a "massive" increase in the quality and availability of online options including video. That gives advertisers something they've never had before, a substitute for TV, Juenger says.
The third factor is profit margin pressures on consumer marketing companies, who are seeing new ways to eliminate waste in their advertising spending.
"The impact on traditional media companies is obvious and severe: bad news. We now see U.S. TV advertising as a share loser. This would result in a significant decrease in steady-state revenue growth rates for the TV-based media companies." Of course, TV's loss in this regard is digital's gain, he says, noting that all of the "traditional" media companies have digital advertising platforms of their own.
How were these trends reflected in the first quarter? In another new report, Michael Nathanson of MoffettNathanson Research, says national TV advertising was down 1%, adjusting for incremental Olympics spending a year ago.
Nathanson figures broadcast was up 4.3% (adjusted for all Olympic spending), with a big gain at NBC offsetting a 34% decline at Fox. Including the Olympics, broadcast was down 14%.
Cable networks were up 3.9%, adjusted for all Olympic spending. But gainers were AMC and Disney.
"Ad growth in the quarter seemed more dependent than ever on each company's ratings hand and the amount of sports event programming in each cable network's portfolio," Nathanson said. "Some executives of first quarter earnings calls pointed to what is still a tepid and lackluster ad environment while others talked up the strength of the marketplace going into the upfront, which could be positioning for what we believe will be a much more difficult negotiation with ad buyers."