In a report commissioned by ISBA – an industry body representing brands advertising in the UK – Enders Analysis has revealed that total TV ad revenues in the UK could fall by £364 million from between 2019-2027 if pre-pandemic trends of declining viewing times persist, and assuming demand from advertisers remains the same. The consultant/analyst company specialising in media and entertainment also revealed that, since 2010, TV viewing has declined by 25% in total, and among viewers aged 16-24 viewing has fallen by 60%. Modelling the impact of declining audience viewing times for 16-34s while assuming pre-pandemic media buyer demand persists, Enders Analysis predicts station average price (SAP) could experience a 135% increase by 2027. Enders Analysis warns that revenue declines could produce a vicious circle where programming budgets are squeezed as a result, impacting audiences and leading to further drops in ad revenue.
With a focus on the UK ad trade, Enders Analysis’ conducted desk research as well as interviews with 25 senior industry experts from across different stakeholder groups. At the Future of TV Advertising Global event, London, Gill Hind (COO at Enders Analysis) and Bob Carley (Head of Media and Diversity & Inclusion Lead at ISBA) discussed the contents of the report, reflecting on the strengths and weaknesses of the current TV advertising ecosystem and what steps can be taken to improve the health of the industry.
Hind started by outlining several points of strength the report found in the UK’s TV advertising trade. Firstly, despite declining audiences, TV remains unparalleled in its ability to deliver the same message simultaneously to millions of viewers, reaching existing and potentially new customers on an enormous scale.
Secondly, Enders Analysis found that the pricing mechanism for buying TV ad space – where deals are struck against SAP – is generally viewed favourably by agencies and saleshouses, who consider it a dynamic way of establishing benchmark prices. Hind notes that the advent of broadcaster video-on-demand (BVOD) services and linear addressable has allowed broadcasters to bridge the worlds of TV and digital advertising by facilitating greater targeting and recovering some of the lost linear reach among younger audiences.
Enders Analysis also found that the TV advertising supply chain was seen as more transparent than for digital, which is overwhelmingly traded in the complex space of programmatic. In their supply chain study published in 2020, ISBA revealed that 15% of advertising spend on programmatic was unattributable, with only half of the investment making it to publishers.
One weakness in the UK’s TV advertising space outlined in the discussion was the uncertainty of future revenue streams for broadcasters. Hind said, “Currently, linear deals are based on share of budget and VOD [are based] on volume. Deals based on share of budget give little certainty of revenues [broadcasters] will take in any given year, just the relative share of an advertiser’s TV budget. Its very difficult to plan business without certainty of future of revenue streams”.
To redress this issue, Hind recommended that the deals across linear and VOD should both be made by volume: “We believe volume deals are more likely to lead to an improved TV advertising environment, rewarding advertisers that spend more or increase spend over a period of time, and providing broadcasters with greater certainty to invest in their programming and their ad product”.
Hind notes that advertisers have also felt the lack of a combined linear and VOD measurement solution throws doubt on the value of BVOD, as they cannot measure deduplicated reach and frequency, or get a clear sense of the efficacy of BVOD advertising compared to linear. Hind believes ad budgets could continue migrating to digital if the industry doesn’t coalesce around a suitable measurement and points to C-flight – the cross-platform campaign evaluation tool, spearheaded in the UK by Sky, ITV and Channel 4 – as a potential solution.
One aspect of the TV advertising industry Hind drew particular attention to was the strain placed on the relationship between brands and some agencies, due to a “misalignment of incentives”. She called for greater accountability and “transparent contractual terms in which media recommendations are totally impartial and based on the most effective outcome for the advertiser, not what’s more profitable for agencies”. She also stressed that advertisers must ensure agency remuneration packages make it sufficiently profitable to hold their accounts.