National television advertisements hit their peak in 2016, exceeding $43 billion, but according to the media intelligence arm of IPG MediaBrands, called Magna, the glory days are over.
Sales fell 2.2 percent year over year for 2017 and the media group predicts they’ll continue to fall about two percent each year through 2022. What happens then is anyone’s guess.
Blame Millennials and Cord Cutters
It’s not hard to see why there’s so much confusion about where to place what ad and when with the current chaos of media streams. Though some people still view traditional television, many prefer to stream exclusively, others only watch on their phones. There are even a few, very few, who don’t even own a television in the traditional sense.
Nielsen’s Total Audience Report for second quarter 2017 showed that while 50- to 64-year-olds watch almost 40 hours of traditional television weekly, those 25- to 34-year-olds are only watching about 18 hours weekly.
The younger group also spends an equal amount of time watching on their smartphones, about 18 hours. Surprisingly, the 50- to 64-year-old group is also catching the digital bug, spending about 22 hours a week watching video content with their smartphones.
In addition, Magna predicts that cord-cutters and “cord-nevers,” people who have never had a cable subscription, will reach about 48 million households in 2020. That’s a lot of eyeballs lost to network and cable television and plenty of mileage that brands will have to make up.
Networks Offer Solutions
Networks like NBCUniversal and the Fox Networks Group are responding with a risky tactic: trimming available ad time during certain shows. Instead of the average 13.6 minutes allotted to commercials during the typical hour, they’ll only have two minutes available during these programs. This plan is set to go into motion by 2020.
This tactic has raised more than a few eyebrows. Ralph Heim, Sonic Drive-In’s VP of Media and Sponsorships told The New York Times that “they’re trying to create a more premium advertising experience for advertisers, and they’re hoping people will pay more,” adding, “At the end of the day you’re following the eyeballs, right?”
Even with a premium experience, brands are facing dwindling audiences as that 50- to 64-year-old population ages and ultimately are overtaken by younger generations with little to no interest in live television. It’s difficult to say if the NBC-Fox model will be a recipe for success or simply a stopgap measure for a much bigger media problem.