Multichannel ad revenue may be the real moneymaker for traditional TV companies in the near future.
While the compound annual growth rate (CAGR) for total US TV ad revenues between 2016 and 2021 will increase a modest 1.3% to $75.2 billion, most growth will come from multichannel ad revenue, like IP-based streaming content or online video ads.
PricewaterhouseCoopers’ (PwC) annual global “Media and Entertainment Outlook,” released Tuesday, found that multichannel ad revenue between 2016 to 2021, in comparison to total growth, will have a stronger CAGR of 2.6%, to $30.2 billion.
But even with this multichannel ad growth, traditional pay-TV providers face new challenges in their transition to monetizing more content in the digital and OTT sector.
While MVPDs have successfully lured linear TV viewers to their on-demand libraries or skinny bundles, they face increasing competition from new entrants like YouTube, Twitter and Facebook – all of whom are striking their own partnerships with content providers.
Also, these MVPDs must also compete with video-on-demand services that have limited or no ads, like Netflix and Amazon Prime. And consumers are increasingly reluctant to sit through traditional commercial spots.
“As a user, you get the ability to essentially opt out of an ad on YouTube by skipping it, but what kind of change does that drive when, as a user, you move back into standard, terrestrial TV or a subscription, VOD environment?” said John Swadener, chief operations officer and lead partner for PwC Experience Consulting.
Some ad-driven networks combat this challenge by offering binge-viewing options, but PwC doesn’t believe these efforts are consistent enough to “offset the impact of constantly licensing content to ad-free services like Netflix,” according to PwC.
Other networks experiment with lighter ad loads, but must increase prices to compensate. Unfortunately, advertisers don’t want to pay more for less.
For instance, the cost of a 30-second spot during the 2017 Super Bowl was $5 million compared to $4.8 million in 2016. Yet, the 2017 Super Bowl drew an average of 111.3 million viewers, down from the 111.9 million during the 2016 Super Bowl.
Despite these declines, the PwC report underscores the need for better cross-channel measurement.
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Consumers are certainly viewing content, they’re just doing so on ad-free subscription services and mobile apps, not in front of a standard TV screen.
And the unfinished business of cross-screen measurement means a lot of views still go uncounted.
“Those four and one-half hours and six minutes of live TV per day was in addition to 37 minutes of time spent on the internet using apps or browsing the web,” Swadener said. “There’s a lot of time being spent every day in front of TV content.”
