If you were to attend any of the Newfronts, Upfronts or post-upfronts conferences— Cannes included— you might conclude that most of the money being spent on television advertising these days was being spent on streaming.
You would, however, be wrong.
While streaming budgets are indeed increasing, they're still nowhere near linear budgets. (A recent study we did at TVREV had the 2023 split at around 70/30 in favor of linear.)
But, I can hear you argue, no one watches linear anymore -- at least not any of the desirable audiences that advertisers covet.
Perhaps. But there are plenty of advertisers who want to reach the masses, all those people who still watch cable (there are, by most reckonings, around 60 million households full of them.)
And the thing is, those brands tend to be the ones with the biggest budgets of all.
The other thing to remember about TV advertising is that most of it is what the marketing nerds call “upper funnel,” or branding and image advertising. The goal is just to make you feel good about the brand so that when you do need whatever it is that they're selling, you will add them to your consideration set.
Nike’s “Just Do It” campaign is one of the clearer examples of this, though far from the only one. Auto manufacturers, soft drinks, restaurant chains and mobile phone providers (among others) all run these big budget branding campaigns, too.
These big branding campaigns also have another “big” associated with them -- big budgets. Production costs can easily run into the tens of millions for an entire campaign, with location shoots and a cast of hundreds.
Meaning that the brands want to see their ads running against original programming, not reruns.
And the problem with streaming right now is that most of the ad avails are against reruns -- reruns that lack the other thing big budget advertisers crave, which is massive reach.
Granted, linear TV ratings are nowhere near what they were 30 years ago, let alone 10. But they’re still the best way to reach a whole lot of people all at the same time. This is key if you are a brand that is not all that concerned with targeting, especially if your self-described audience is “everyone with a mouth.”
This is also why linear still gets a lion’s share of all those big spenders’ ad budgets. And why they still largely adhere to the one-third/two-third split: one-third of the ad spend goes to prime time for its impact, two-thirds goes to cable to extend the commercials reach and to hit audiences they're missing on prime time.
For now.
This will change and relatively soon. Figure by the end of the 2020s, probably much sooner.
What needs to happen first is for there to be more original content on ad-supported streaming and more people watching that ad-supported original programming -- like a lot more people. Hulu alone cannot carry the market.
This is changing, though.
The ad-supported tiers of Netflix, Disney Plus, Max, Paramount Plus and Peacock are growing and it is very much in all those companies' financial interests for those ad-supported tiers to continue to grow.
Even Amazon Prime Video and Apple TV Plus, which don’t have ad-supported tiers, run ads against their live sporting events.
So we will get there, eventually and the ad-supported tiers of the streaming services will reach critical mass, meaning they have more viewers in total than network prime time.
At which point, the real shift in ad dollars will happen.
A light bulb will flash on and all those big-budget advertisers will declare, “Now I get it! Ad-supported SVOD is the new prime time and FASTs are the new cable! Here! Take all of our money!”
Now, of course when this happens, the streaming services will have hopefully gotten their ducks in order -- meaning they’ve figured out things like measurement. Transparency. Privacy issues. Data veracity. And a way to stop the same two ads from popping up in every single ad pod.
(They’re working on it. It’s not as if they don’t know that this is an issue.)
There will also be another decision that will have to be made at that point, which is about the ultimate fate of broadcast and cable TV, prime-time in particular. It’s a decision each of the four major networks will need to make, and it’s likely they will each make different decisions.
They can decide to abandon prime time permanently (unlikely). They can use prime time as a flywheel of sorts for streaming, putting out last week’s, last month’s or even last year’s episodes out in the hopes of attracting more subscribers. They can do what Max did with White Lotus, The Last Of Us and other hits -- make it available on streaming at the same time it runs on linear TV.
Or they can do nothing and keep cranking out a separate set of shows for the prime-time audience, which is likely to bottom out at somewhere just over a third of U.S. households.
Any of these options can work, and we’re still too early in the game to make any real predictions. Other than this fairly obvious one, anyway: the year streaming becomes ascendant will mark the beginning of a new era for TV and the very nature of the business.
Stay tuned.
