COMMENTARY

Upfront TV Ad Eye-Opener: 'Negative' Linear TV Pricing, But Higher Overall?

• by Wayne Friedman , Staff Writer, June 1, 2023

With upfront TV negotiations currently going on -- and cost-per-thousand viewer price hikes looking as likely as the Boston Celtics hoping to play one more game against Miami Heat to decide the NBA's Eastern Conference Champion -- one might consider everything affecting a probable weak market.

It is not just continuing viewer erosion of live, linear TV programming, according to many -- but a notable and continuing, expected downturn in the economy overall. 

Think about the current U.S. ad economy projection from Dentsu -- which has lowered its outlook. Media price inflation, according to Peter Huijboom, chief executive officer of Dentsu Media International Markets, “hides the more lackluster reality: 2023 will be a flat year for ad spend."

For many media companies the latter would be good news. For TV, a flat market would be a cautious, hopeful dream. For their part, TV networks have hit advertisers with repeated media inflation over recent years, according to many experts.

But this time looks to be quite different. Meld this with all other factors, and many expect that for the first time in more than a decade, CPMs  -- especially for live, linear TV -- could be in the negative territory. 

And don't forget about current marketplace conditions, which many still regard as an important measure of where the upfront will land: The near-term buying of national TV inventory in the "scatter market."

TV networks will continue to push toward the positive -- the still shiny, relatively new objects of connected TV streaming platforms that consumers are fond of -- even as many might be looking to make slight streaming cutbacks. 

Expect press releases from TV networks later this summer to highlight this area. So much so that they might be talking up positive CPM price hikes -- all in.

And did we forget to tell you there is still a writers' strike going on? Remember, the last one lasted several months -- the 2007-2008 TV season (from November 2007 to February 2008).

Finally, we would be remiss not to add in the complexity or volatility that is associated with measurement disruptions. It is more than having multiple, new non-traditional metrics to consider -- it is also about doing deals this year, while at the same time thinking about next year's industry upset to come when Nielsen releases its cross-platform Nielsen One.

Uncertainty is always a term tossed around in pre-upfront conversations and observations.

But this year, for many analysts, media buyers will look with certainty to be in the driver's seat. Even if in slow-moving vehicles.

 

SPONSOR CONTENT FROM PREMION

Revving Up Car Sales: How Auto Dealers are Shifting into High Gear with CTV

Author: Peter Jones, Head of Local Sales

With the pandemic supply chain constraints in the rear view, the tide has turned for auto dealerships — and they now find themselves in a position of abundance. Car inventories have nearly doubled since reaching their lowest point in February 2022, according to the U.S. Bureau of Economic Analysis.

With rising vehicle inventories, car dealers are instead battling for the attention of the auto intender in an increasingly competitive market. No longer fixated on inventory sourcing, automotive marketers are seeking more effective ways to reach in-market auto intenders, while ensuring that their ad dollars work harder and smarter.

In the quest to reach relevant in-market car buyers, Connected TV (CTV) advertising has emerged as a channel of choice for auto marketers for driving outcomes. This year, eMarketer forecasts that 85% of U.S. households are projected to be Connected TV (CTV) households, and that nearly 40% of daily TV time will be spent on a connected TV*.

Additionally, according to a March 2023 Cord Evolution study, 82% of people planning to buy or lease a vehicle in the next 12 months watch ad-supported OTT. Of those auto intenders who view ad-supported OTT, 71% of them are looking to buy a new car, 61% are looking to buy a used car, and 21% of this audience is ready to lease a car. Furthermore, 52% of all U.S. auto-intenders cannot be reached via traditional pay TV**.

The availability of advanced targeting, measurement and attribution capabilities is driving more auto advertisers to shift more ad dollars to CTV as they can now measure the effectiveness of their campaigns in more precise ways and connect CTV viewership with vehicle sales.

Driving SUV Sales for a Local Auto Dealership

A local dealership had a specific goal of driving sales for their increasing inventory of SUV models, and they wanted to measure how their CTV campaign contributed to their sales—and identify any sales they may have lost to their competition.

As a consultative and insights-driven partner, we empowered the dealer to reach highly targeted prospects—auto intenders grouped by body styles such as Sedan, Minivan, and SUV, and to competitively conquer specific brands. Additionally, leveraging our Polk Attribution solution, we measured the number of new car sales influenced by our campaign.

By analyzing performance insights, we determined which creative message, each promoting a different car model, was the most effective in generating website responses. Through strategic targeting of the SUV audience, optimizing and making creative adjustments, we were able to elevate the dealership from the 6th position to the 2nd position in sales rank compared to competitor dealerships in just one month.

All told, the Premion campaign drove 17 new car sales, a 112% Lift in vehicle sales versus non-Premion exposed audiences. The dealership ranked #1 in sales for people exposed to the Premion campaign and ranked #2 in overall attributed vehicle sales regardless of car brand/make. The campaign drove both interest and qualified leads to the website at a $7.61 cost per website visit — 969 exposed website visits with 594 (62%) taking further action to visit individual vehicle description pages.

For more automotive and CTV advertising insights, let’s have a conversation.

*eMarketer, Connected TV Households US, 2023-2027, February 2023; eMarketer, Average Time Spent per Day with TV vs. Connected TV by US Adults, 2019-2024, April 2023. Copyright@2023 Insider Intelligence. All Rights Reserved.

**MRI-Simmons, 2023 March Cord Evolution

 

COMMENTARY

SVOD Revenue Will Nearly Match Pay TV By 2027, But ARPUs Are Another Story

• by Karlene Lukovitz  @KLmarketdaily, May 26, 2023

Thanks in part to live sports shifting to streaming channels, annual revenues for U.S. subscription video on demand (SVOD) services will nearly equal those of traditional pay TV in 2027, according to a forecast from data and analytics company GlobalData.

That will mark a critical tipping point in the ongoing dynamic of streaming growth versus continued decline in cable and satellite TV and IPTV.

However, the outlook for SVODs’ average revenue per user/ARPU or per subscriber (ARPS, in GlobalData’s terminology) is far less impressive.

SVOD services’ revenues are projected to see a compound annual growth rate (CAGR) of 6.3% between 2022 and 2027, driving revenue up from nearly $47.6 billion to $64.6 billion.

During the same period, pay TV is expected to have -6% CAGR, with revenues dropping from $88.5 billion to under $65 billion.

SVODs’ household penetration reached 260% in 2022, reflecting multiple subscriptions in many households, and is projected to jump to 312% in 2027.

Pay TV’s U.S. household penetration rate is projected to slide from 47% in 2022 to 33% in 2027, with ongoing declines registering across cable TV, broadband-delivered IPTV, and direct-to-home/satellite TV subscriptions as the numbers of cord-cutters and those who’ve never subscribed to traditional pay-TV (“cord-nevers”) continue to grow.

The dynamic parallels the acceleration of the transition of live sports from traditional TV to streaming platforms via a growing number of agreements between major-league sports franchises and entertainment companies — including, most recently, NBCUniversal’s snagging the first exclusive live-streaming of a National Football League playoff game, and reports that Disney intends to create a standalone D2C ESPN streamer.

“SVOD was already on an impressive upward trajectory, but the addition of live sports programming is changing audience viewing habits even more, helping drive additional pay-TV cord-cutting and SVoD growth,” says Tammy Parker, principal analyst at GlobalData.

But the shoe is on the other foot when it comes to average revenue per subscriber, according to GlobalData’s estimates.

U.S. pay-TV ARPS reached $113.49 in 2022 and is expected to rise to $118.34 in 2027, thanks largely to price increases by cable TV and satellite TV providers.

Of course, given that pay-TV’s cost and bundle inflexibility are what has driven so many to cut the cord in favor of streaming, you would have to assume that further price hikes will only accelerate its subscriber losses, so even sky-high revenue per subscriber may not allow for much profitability at some point.

Meanwhile, U.S. SVOD providers are projected to be basically stable, with an already low ARPS of $12.16 in 2022 increasing by less than $1, to $12.79, in 2027.  

SVOD price increases will be suppressed by heavy competition, increased use of ad-supported tiers, cheaper plans with limited content, and monthly and temporary discounts, sums up the analysis, adding that there will be less pressure on SVOD providers to hike prices as inflation eases.

GlobalData expects Netflix to continue to dominate SVOD revenue market share, attracting about three times as much revenue as Amazon Prime and twice as much as the Hulu SVOD (not including its live TV vMVPD) each year through 2027.

If these ARPS projections are on the mark, achieving profit in the SVOD streaming segment will be increasingly challenging, and heavily dependent on controlling or cutting content costs and focusing on surefire franchises -- trends already well underway at some providers. Amortizing content costs across a growing number of free and lower-priced tiers will obviously help. But it would seem possible that SVODs’ increasingly blurry value proposition could take a significant toll on their subscriber numbers in the coming months and years. Do providers’ models take that into account? 

On a more macro level, all of this makes one wonder about exactly what assumptions are behind the differing streaming business models now out there, given that to be financially viable, most of them need to strike a tricky balance of volumes and pricing among premium, free, lower-cost, discounted and sponsored subscriptions, also factoring in current and projected advertising levels, with some content licensing and perhaps other revenue sources added to the mix. (Not to mention the impacts on linear TV revenues, for some majors.)

With so many moving parts in play, and consumer behavior and even advertising spend subject to more volatility than ever, can even the savviest operator confidently predict the dynamics and outcomes over even a few years? 

Guess we'll find out soon enough.