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Per Dickens, it is the best of times and the worst of times for TV. Depending on which stats are cited, the vast majority of the average American’s TV/video usage continues to be done the old-fashioned way, on a TV set. While upwards of 73% of all homes now have streaming capabilities, meter-based research indicates that streaming content accounts for only 10-15% of the typical adult’s TV diet.
However, linear TV continues to face major problems, not the least of which is cord cutting. Millions of TV homes continue to cancel their cable or satellite services, with some opting to go over-the-air only, thanks in part to vastly improved antennas. Others have turned to vMVPDs, which enable reception of linear TV and other content online. And there are even those who have decided they can satisfy their relatively modest needs by going broadband-only.
It’s likely that cord cutting will continue, but at a diminished pace, because those who stick with pay TV are typically TV’s heaviest viewers and enjoy the huge doses of programming that cable and satellite provide. Because streaming services have yet to provide such content (sports, news, etc.) in any meaningful way, a large segment of TV homes is expected to continue to rely on pay TV for this programming.
Probably the biggest news of 2019 and certainly of 2020 is the major new competition coming to the SVOD/OTT arena. Not only are digital players such as Apple entering the picture, but more specialized newbies like Quibi (which hopes to target millennials with short-form dramas and other content) are also joining the fray. Even more significant is the invasion of SVOD by the TV/Hollywood establishment, led by Disney (ABC), Comcast (NBC) and others.
A major part of these new initiatives involves the bundling of original TV program content created by the networks with reruns of former hit shows (many of which had been licensed to Netflix), plus of course sports, news and movies. Having helped create the monster, the networks and movie studios are pulling much of their controlled content from Netflix and offering it on their own SVOD platforms. This leaves Netflix (with its current 40-45% share of SVOD usage in the U.S.) to face powerful new competitors, but without most of its successful program inventory intact. Heavily in debt, Netflix is borrowing more dollars—in some cases going the junk bond route—to fund more original content, and is also focusing on international subscriptions, which are still growing at a steady rate. So far Netflix has rejected the obvious solution, creating an ad-supported option for subscribers, even though this could bring in enough ad revenue to pay off much of its debt.
Meanwhile, advanced TV has had its own struggles. Although there has been a lot of buzz about it, advanced TV still constitutes a very small portion of ad spending, despite recent impressive percentage gains. Several factors account for this. First, most national TV advertisers continue to buy TV time on a corporate basis, which blunts any edge they might have in targeting ad buys for an individual brand. Second, corporate buys allow a company to bundle all of its brands together and use this clout to garner lower CPMs. Were each brand to go it alone, there would be no guarantee that the sellers wouldn’t raise CPMs for smaller and mid-sized brands so high that any targeting advantage they might gain would be offset by the much higher prices. Third, many of the advanced TV systems don’t really do what they promise, and many mass product advertisers see no need to use them.
So what changes can be expected in 2020? Clearly, it will be a time of continued evolution for linear TV as it morphs into a multi-dimensional medium with digital and SVOD elements blending in. More sophisticated rating methods are also being developed (including viewer attentiveness) and new sources of revenue are being added (such as in the DTC and tech sectors) that will begin to offset losses as current advertisers move more of their dollars to digital video buys. With all of these elements in play, it should prove to be an interesting year.
TV Dimensions 2020 is currently available for pre-order and will be released on January 15th, 2020. TV Dimensions provides the only independent and objective analysis of what's happening in television today. It covers all relevant aspects of the medium's performance, ranging from audience fragmentation, program type appeals, viewer attentiveness, and ad impact metrics to how the TV industry is adapting to ensure its continuing profitability, the competitive inroads made by subscription video on demand (SVOD) and how the upfront time buying process works and can be improved. Many analyses are exclusive to TV Dimensions, including how many ads the consumer really sees, estimating ad awareness by GRP level, and upfront ad revenues, as well as our most requested dataset: our annual upfront CPM estimates and trending.
TV Dimensions is also included in a one-year subscription to our MDI Direct service, which offers on-demand access to our complete research library for one low price. More information, including a demo of this service, is available on our website.