What’s wrong with this picture?
The costs and benefits of television advertising are out of whack and getting worse, according to a new analysis from McKinsey & Co.
In an unsettling prognostication for marketers, broadcasters and their collective shareholders, the consultants reckon that TV advertising will be 35% as effective for some advertisers in 2010 as it was in 1990.
Inflation-adjusted ad spending on prime-time broadcast TV has increased about 37% over the last decade, while the number of viewers has dropped by 41%, according to the McKinsey analysis depicted at left.
“What’s wrong with this picture?” the consultants asked rhetorically in a white paper the firm is sharing with its blue-chip clients.
Taken to its logical conclusion, the escalating inefficiency in television advertising suggests that marketers will shift a growing proportion of their budgets to the digital media that are the reason their once-loyal audience is tuning out.
At the same time broadcasters have been cranking ad rates, McKinsey notes, viewers have been migrating to everything from the Internet to games to DVDs to iPods to homegrown video. But we knew that.
The truly startling factoid in the research is that teenagers say they spend nine-tenths of an hour per day reading a book or magazine vs. a mere 30 minutes for the rest of us. Parents shouldn't don’t get too excited about this. Half of the kids report that they are reading while listening to music, watching TV, talking on the phone, listening to the radio or some combination of the above.
Beyond battling the media clutter that’s fragmenting their audience and rocking their world, TV execs also must contend with the impact of TiVo, which famously permits viewers to zap around commercials, and the looming on-demand delivery of online video.
Of all the threats to the traditional broadcasting model, I would argue that video on demand, which remains in its infancy, is the greatest.
All the broadcast and some of the cable networks are experimenting with offering their prime fare online for somewhere between $2 and free (in conjunction with pre-roll advertising).
If the nets like the results – and what’s not to like? – they energetically will circulate ever more of their programming throughout the web, keeping the resulting revenues for themselves. As soon as enough video-enabled cell phones are in the hands of consumers (industry gurus say it will take a couple more years), VOD will go mobile, too.
This gain for the networks would be a big loss for their local affiliates. The continuing disintermediation of audience and revenues will carve into the monopolies that historically ensured the great and growing value of local TV franchises.
Unless local broadcasters start developing new digital revenues, they will feel first hand the pain suffered by the newspaper publishers whose ad share, profits and enterprise values have plummeted in the last couple of years. (The public newspaper companies are trading at roughly 60% of the value they commanded just 18 months ago.)
Here’s one idea for the affiliates, courtesy of McKinsey: As advertisers look for cost-effective ways to connect with customers, they will want to spend $1.4 billion to $3.2 billion for online video advertising by 2007. Today, there is only about $600 million worth of online video inventory to sell.
Anyone want to harvest some low-hanging fruit?
In an unsettling prognostication for marketers, broadcasters and their collective shareholders, the consultants reckon that TV advertising will be 35% as effective for some advertisers in 2010 as it was in 1990.
Inflation-adjusted ad spending on prime-time broadcast TV has increased about 37% over the last decade, while the number of viewers has dropped by 41%, according to the McKinsey analysis depicted at left.“What’s wrong with this picture?” the consultants asked rhetorically in a white paper the firm is sharing with its blue-chip clients.
Taken to its logical conclusion, the escalating inefficiency in television advertising suggests that marketers will shift a growing proportion of their budgets to the digital media that are the reason their once-loyal audience is tuning out.
At the same time broadcasters have been cranking ad rates, McKinsey notes, viewers have been migrating to everything from the Internet to games to DVDs to iPods to homegrown video. But we knew that.
The truly startling factoid in the research is that teenagers say they spend nine-tenths of an hour per day reading a book or magazine vs. a mere 30 minutes for the rest of us. Parents shouldn't don’t get too excited about this. Half of the kids report that they are reading while listening to music, watching TV, talking on the phone, listening to the radio or some combination of the above.
Beyond battling the media clutter that’s fragmenting their audience and rocking their world, TV execs also must contend with the impact of TiVo, which famously permits viewers to zap around commercials, and the looming on-demand delivery of online video.
Of all the threats to the traditional broadcasting model, I would argue that video on demand, which remains in its infancy, is the greatest.
All the broadcast and some of the cable networks are experimenting with offering their prime fare online for somewhere between $2 and free (in conjunction with pre-roll advertising).
If the nets like the results – and what’s not to like? – they energetically will circulate ever more of their programming throughout the web, keeping the resulting revenues for themselves. As soon as enough video-enabled cell phones are in the hands of consumers (industry gurus say it will take a couple more years), VOD will go mobile, too.
This gain for the networks would be a big loss for their local affiliates. The continuing disintermediation of audience and revenues will carve into the monopolies that historically ensured the great and growing value of local TV franchises.
Unless local broadcasters start developing new digital revenues, they will feel first hand the pain suffered by the newspaper publishers whose ad share, profits and enterprise values have plummeted in the last couple of years. (The public newspaper companies are trading at roughly 60% of the value they commanded just 18 months ago.)
Here’s one idea for the affiliates, courtesy of McKinsey: As advertisers look for cost-effective ways to connect with customers, they will want to spend $1.4 billion to $3.2 billion for online video advertising by 2007. Today, there is only about $600 million worth of online video inventory to sell.
Anyone want to harvest some low-hanging fruit?
posted by Newsosaur at 7:29 PM
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