US ad spending on TV declined in 2017 and will also drop in 2018

Even though the number of viewers watching TV has been declining for years, spending on TV ads had continued to grow until 2017. Last year is the first time since 2009 during the recession that spending on ads in the U.S. declined.

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Ad spending on U.S. TV

In 2017 ad spending on TV in the US dropped by 1.5 percent. It is projected to decline a further 0.5 percent in 2018 and another 1.0 percent in 2019 according to eMarketer. The company had predicted a small increase back last September but has had to revise that figure downward as the market changes.

In 2016 TV made up 37 percent of total U.S. advertising expenditure. In 2017 this had dropped to just 34 percent. In 2018 it is expected to drop further to just 32 percent.

In 2020 the Summer Olympics and the U.S. presidential election will see a slight recovery as TV ads grow by 0.5 percent to $69.52 billion that year.

In spite of the 0.5 percent drop predicted for this year a total of $69.87 billion will still be spent. However, the spending shrunk by about one billion last year according to eMarketer.

Reasons for the decline in TV advertising

Through 2018 and 2019 it is expected that there will be an overall loss of $1.05 billion. Cord cutting and over-the-top viewing such as with Netflix is contributing to the decline. As reported in a recent Digital Journal article the response to cord cutting has been often counterproductive, raising prices and increasing the number of ads.

Also relevant to the decline is the growth in digital advertising dominated by such sites as Google and Facebook. Ad growth in that area is expected to grow by almost 19 percent in 2019 to $107.3 billion.

Monica Peart, senior forecasting director for eMarketer said: “The shift of audiences to OTT viewing is changing the climate of the TV ad market. As ratings for TV programming continue to decline, advertiser spending will also continue to see declines, especially in years that do not boast major events such as presidential elections and Olympic games.”

OTT viewing

Wikipedia describes OTT viewing as follows:" Over the top (OTT) is a media distribution practice that allows a streaming content provider to sell audio, video, and other media services directly to the consumer over the internet via streaming media as a standalone product, bypassing telecommunications, cable or broadcast television service providers that traditionally act as a controller or distributor of such content."

Many OTT platforms are based on subscription and do not air advertising but some digital TV services do sell ads. Roku will surpass $293 million in ad revenue this year. Hulu's ad revenue is expected to grow by 13 percent this year to $1.12 bilion.

E-Marketer, senior analyst Paul Verna said: "Over-the-top platforms are growing in number and size, and many compete directly with pay TV by offering bundles of live channels at attractive price points. Consumers who want to cut or shave the cord now have a wealth of options that didn't exist a couple of years ago. And we expect the offerings to become even more robust as more players enter the market."

Cord-cutting continues as OTT views grow

The estimates by e-Marketer were increased substantially last July for cord-cutters from 2017 through to 2021. For this year the number of TV views will drop 0.2 percent to 297.7 million. The number of OTT views will grow by 2.7 percent and will reach 198.6 million. As shown on the appended video, digital advertising may soon surpass TV advertising.

Previously published in Digital Journal