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Future of TV Media Ad Spend

After some tough times, some TV giants express ad spend optimism

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By John McCarthy, Opinion editor

May 12, 2023 | 9 min read

Globally, there’s been a slump in demand for TV (and video) advertising. The Drum explores what the market leaders are blaming it on... and how they plan to navigate it.

Neon sign of TV

At a glance: TV companies are hitting an advertising wall

Media companies around the world have been blaming a reduction in advertising spend from top brands over the last few financial quarters.

Nowhere is an ad-spend deficit more noticeable than in the TV businesses we spend our recreational time with. After, all as the revenue determines whether our favorite shows and content are financially viable, or whether our streaming subscriptions remain affordable.

Here’s what the financial leaders at the world’s top TV businesses are saying after a few tricky quarters.

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Disney

Disney has just consolidated Disney+ and the Hulu apps in the hopes that a bigger bundle equals more value for consumers and more advertising opportunities. It’s almost a full digital recreation of the cable package.

In this period of reformation, it is not alone in losing money to streaming. In Q3, it projects streaming losses to widen by about $100m in the next quarter. Meanwhile, second-quarter domestic linear advertising revenue declined 10% year over year.

But there are positive signs, now more than 40% of its domestic advertising portfolio is addressable, including streaming, which we expect will continue to grow over time. It says it is “well-positioned to scale as the market improves and audiences continue to grow. We’ve added more than 1,000 advertisers over the past year and now have 5,000 advertisers,” says Christine McCarthy, senior executive vice-president, chief financial officer at Disney,

She added: “The overall entertainment advertising marketplace has been challenging. While the weakness has moderated somewhat, we anticipate that some softness may continue into the back half of the fiscal year.”

Comcast

Peacock's steaming push continues to burn money for now. In the previous call, the company estimated Peacock losses would hit $3bn in 2023.

Overall revenue was “flat”. Video, advertising, and other revenues declined 7% to $9.8bn. Media revenue decreased 21% on an as-reported basis and 2% when excluding the Olympics and Super Bowl, primarily due to a 6% decline in domestic advertising.

Jason S. Armstrong, Comcast’s chief finance officer said this “reflects softness in the overall ad market, which appears to have stabilized.” There is some positivity, excluding Olympics and Super Bowl lifts, Peacock advertising increased by an impressive 90%. It’ll need this momentum to continue.

Paramount

Paramount’s chief exec Robert Bakish issued a warning that ad revenue would be “a bit below” expectations at the end of 2022, a challenge hitting both the linear and the digital businesses.

Now on the latest call, Bakish said: “There are signs of stabilization in the ad market. We like what we’re seeing in many categories, and we like what we’re seeing in the direct side of digital. And as the market continues to turn, ad growth will improve. As it does, we are confident that the strength of our multi-platform strategy puts us in a unique position to capitalize on it.”

Due to global ad market weakness, it saw a 7% decline in total advertising revenue, breaking that down, there was 15% growth in DTC advertising and an 11% decline in TV media advertising. The decline in TV media was impacted by international markets and fewer NFL games year-on-year.

As for spending categories, he revealed improvement in key buying categories including pharmaceuticals, food and beverage, travel and auto. Categories like insurance, web services and big tech “remain relatively weak”.

He expressed optimism for H2 growth.

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Warner Bros. Discovery

The newly merged behemoth’s first-quarter revenue of $10.7bn was roughly in line with analysts' estimates. And its US direct-to-consumer streaming business turned a $50m profit, bringing the whole business into profit for the first time this year.

The company expects its US streaming business to be profitable for the full year of 2023, a year ahead of its previous estimate.

But in Q2, Warner Bros. Discovery reported a 14% decline in advertising revenue. Chief exec David Zaslav expressed optimism about the advertising market and the potential for recovery as the economy improves and more advertisers shift their budgets to streaming platforms.

ITV

Meanwhile, across the Atlantic, the UK’s biggest commercial broadcaster reported a 10% drop in advertising revenue in Q1 and expects a 12% decline in Q2. Brands have tightened budgets amid the continuing cost of living crisis.

April ad revenue dropped 12%. May will likely be down 10% and June 14% year on year.

However, there was good news. Total digital revenues were up 18% to £411m and total streaming hours were up 9% as its streaming transformation with ITVX takes hold. 90% of ITV’s digital inventory is now sold through the addressable platform Planet V.

McCall did not share the optimism of the state-side TV C-suite, perhaps more likely down to the UK’s economic prospects than any vast media differences. She said: “The outlook for total advertising revenue is challenging as expected given the current macroeconomic environment.”

She shrugged off concerns pointing to Love Island coming later this year (as well as the return of Big Brother). Shows that’ll put millions in front of screens and drive advertiser outcomes.

Meanwhile, the video players in tech, Meta and Google may provide more details.

Meta’s recent earnings said advertising impressions were up 26% year-over-year, while ad prices were down 17% year-over-year. The company attributes this decline to “strong impression growth, especially from lower monetizing surfaces and regions, foreign currency depreciation and lower advertising demand”

It believes coming improvements in targeting and measurement will drive better prices.

Google’s chief financial officer Ruth Porat commented on the third drop in ad sales since Google became a public company in 2004 It was also its second consecutive quarterly decline (3.6%) in Q4. “We did see some signs of stabilization in ad spend.”

Alphabet Inc. reported $54.5bn in ad revenue for the first quarter, a decrease of less than 1% from the same period last year. YouTube advertising was down 2.6% year on year.

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