Kagan: Decline in viewing behind CPM inflation

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A lack of major international televised sports events and continued decline in viewing were key contributors to rising CPMs on the flagship channels of Europe’s major commercial TV networks in 2017, according to the a report from Kagan, the TMT arm of S&P Global Market Intelligence.

Key highlights from the report include:

  • The cost of advertising has escalated on many of the flagship channels of Europe’s major commercial TV networks in 2017. Two key causes of CPM inflation in 2017 were
  1. a) the absence of the draw of major international televised sports events such as the Olympics and UEFA European Championships (both held in 2016) to attract viewers, and
  2. b) a reduction in commercial viewership as part of an ongoing general decline in linear TV viewership.
  • A rise in TV advertising costs can be beneficial to networks if fuelled by increased advertiser spending. Kagan notes that this has not been the case on the major channels in most European markets, where declining audiences have restricted the supply of inventory – leading to inflation.
  • In the UK, difficult post-Brexit economic conditions contributed greatly to a declining TV ad market spend in 2017 as advertisers reassessed their marketing budgets. Decreases in ad spend alone on a TV network usually cause CPMs to fall, but Kagan estimates that major UK channels (such as ITV, ITV plc’s most popular linear channel) saw greater commercial audience declines to counteract any fall in advertiser demand.
  • On German network ProSiebenSat.1 Media, Kagan estimates that its two largest linear channels ProSieben and Sat.1 saw substantial CPM inflation as they took the Group’s biggest hit for loss of viewing share in 2017. ProSiebenSat.1 Media attributed the decline to increased competition from several new niche and genre-specific channels on the German FTA market.
  • Kagan estimates CPM deflation on Finnish channel MTV3 over recent years due to the channel struggling to generate ad sales in a weak TV ad market. Kagan sees further deflation in 2017 numbers due to recent increased investment in local content providing a boost to linear viewing. Despite the improved audiences, Kagan estimates a continued decline in ad sales due to the Finnish TV ad market’s ongoing instability.
  • On TV4, the flagship channel of Swedish network TV4 Group: Kagan numbers saw TV4 ad prices rise in 2017, driven by strong Group advertising revenues in a record-breaking Group financial performance for the year. Furthermore, TV4 Group’s increased viewer reach (after a push for increased investment in local content inflation) was enough to bring inflation down to an adequate level.

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