Weak US TV earnings: implications for advertising on both sides of the Atlantic

September 11, 2015  | Subscribers Only

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Weak US quarterly earnings have fuelled the narrative that TV advertising is heading into a structural crisis. In their filings, television companies quote the erosion of linear viewing and the rise of OTT consumption as key factors for flat or declining net advertising revenues (NAR). Advertising erosion due to viewing declines had been a threat, not an actuality. The real news from the US earnings figures is not that audience is in decline, but that its long prophesized impact on advertising revenues has finally arrived. Advertising revenue is a function of audience, advertising volume and advertising price, and so far, on an aggregate basis, weak audience could be balanced by tweaking other variables. This quarter was different – or so it seems. Yet we argue that (1) the status of TV advertising in the US is more complex than top-level figures suggest and that (2) structural differences between US and European TV ad markets do not afford a simple ‘read-through’ of financial results across continents and markets. While linear viewing may erode, the implied demise of TV is far from a linear story. 

Highlights: 

  • The real news from the US earnings figures is not that audience is in decline, but that its long prophesized impact on advertising revenues has finally arrived.
  • TV declines in the US are owed to a range of cyclical factors with greater immediate impact than audience erosion. 
  • Structural differences between US and European TV ad markets do not afford a simple ‘read-through’ of financial results across continents and markets. 
  • Our analysis of SEC filings and conversations with US planning and buying agencies suggest that viewing decline has been overstated in the public interpretation of the quarterly earnings. 

In this report: 

  • The real news from the US earnings figures is not that audience is in decline, but that its long prophesized impact on advertising revenues has finally arrived.
  • TV declines in the US are owed to a range of cyclical factors with greater immediate impact than audience erosion. 
  • Structural differences between US and European TV ad markets do not afford a simple ‘read-through’ of financial results across continents and markets. 
  • Our analysis of SEC filings and conversations with US planning and buying agencies suggest that viewing decline has been overstated in the public interpretation of the quarterly earnings. 

List of tables and charts: 

  • Exhibit 1: Negative impacts on advertising revenue as stated in SEC filings*
  • Exhibit 2: Share of advertising revenue losses by source*
  • Exhibit 3: Share split TV net advertising revenue by channel type

Number of pages: 5
Number of charts and tables: 3

Geography
Europe USA
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