The news that viewers are switching away from conventional live TV is hardly new. But a report from equity analysts at Deutsche Bank, and prompted by a detailed examination of the main advertising catalysts for Europe’s main public broadcasters, shows alarming falls in viewing loyalty.
The report says that the costs of reaching these viewers is rising for advertisers and as a consequence the bank is recommending to investors that they “SELL” their stakes in French commercial broadcaster TF1, as well as Spain’s Mediaset and Atres Media (the former Grupo Antena 3/A3TV).
“Over the past two weeks we have conducted our quarterly discussions with eight representatives of advertising agencies responsible for buying TV advertising, and industry sources connected to sales houses. We speak to the local offices of the major agencies to get on-the-ground views. The major conclusions on ad spend on TV are that in the UK, late money has delivered surprisingly strongly, but in all other markets, spend has been less than the broadcasters’ guidance at 1Q results over April & May,” says the bank.
The consequences are quite dramatic. The declines have prompted Deutsche Bank to revise downwards its expectations for TF1 by 10 per cent-11 per cent, and 2 per cent-9 per cent for Mediaset Spain and Atres. German media giant RTL is trimmed by 1 percent, although a surge of advertising coming into ITV and Mediaset Italy has encouraged the bank to upgrade the pair by 3 per cent-4 per cent.
As to the decline in viewing linear TV, the bank says: “That we are watching more on-demand programming from tablets, mobiles and smart TVs, as well as PVRs, is well established. But the hard data across Europe is very partial and the measurement of on-demand viewing is inconsistent and partial. But we now have full data for 2017 viewing levels across all European markets from national measurement agencies & Group M. This shows that the linear viewing decline accelerated over 2017. Even in Germany, which has been relatively slow to adopt on-demand, saw viewing fall in 2017 for the first time. It also shows on-line is failing to offset live viewing declines.”
The bank adds that this shift to on-demand viewing means a consequential share loss for Euro broadcasters. “Compare a 5-30 channel home in a traditional DTT (Freeview/TNT) world with the almost unlimited content available on a mobile device, tablet or a broadband-connected “smart TV”, from YouTube, Amazon Video, Google Play, Vice News, Eurosport Player and national platforms like Daily Motion, Magine, Cofunk, Magine TV. Not all of these carry advertising, but many do. In this world, traditional broadcasters are clearly failing to replicate their share of TV advertising spend. We have shown this in prior TV Ad Monitors for all Euro TV groups, but we now have estimates based on our industry contacts for the latest UK online video ad share.”
There’s more. The report says that the total TV pot is leaking even more viewing. “The assumption that “TV is in rude health” and that overall spend by marketers across live and online/on-demand viewing will remain unchanged, even if the live portion falls, is very questionable. Other ad media have clearly seen the effect of “offline dollars turning to digital dimes”; online classifieds most notably and, arguably, this is reflected in the disconnect between advertising & marketing spend with GDP in developed markets. But our 2Q checks showing TV ad spend disappointment versus guidance levels and agency expectations earlier in the year highlights this is surprising the industry on the downside.”