When you consider the multiple ways there are to watch your favourite shows – Netflix, Lightbox, and other online and subscription services – you might think that regular TV viewing and advertising is affected. However, the market for TV ads still overshadows online video ads by 15 times. While it seems like there is an apparent lack of competition, the biggest competition TV advertising has is with itself. The most major factor changing TV advertising is the disjunction of its audience.
This is starting to happen to New Zealand with the introduction of more and more on-demand services but to truly understand the effect we should look at a larger market where these services have been a reality for longer.
As an example in 2014, there were 318.9 million people in the United States. There are 318 million televisions across the country, so nearly a TV per person. Following closely are internet-connected computers, of which there are 243 million in the U.S. Despite the close numbers, Americans, on average, spend 175 hours per month with their televisions compared to only 18 hours with Netflix and Hulu.
TV advertising is still growing, albeit rather slowly. However, it’s possible that TV advertising is nearing its peak. Considering there was over a 5% decrease in growth from 2010 to 2013, it doesn’t seem like an unlikely conclusion to come to.
While advertising rates in television have decreased, the number of channels available to viewers has increased. In 2008, if you had a full channel list, you had 129 channels to choose from. Jump forward five years to 2013, and you suddenly have 189 possible channels. The average American only watches about 17 of those 189 channels. We all only have so much brain space and time, so we keep our TV lineup static despite the increase in available options.
The biggest factor to the decline in TV advertising and viewing rates is the variety of available programs and the multitudes of interests amongst different people. The series finale of M*A*S*H was watched by over 60% of households in the U.S, or over 105 million people. Compare that to the series finale of Friends, which was watched by half the amount people and about half of the percentage of households, despite there being a larger number of households with televisions in 2004 compared to 1983.
With the larger number of available channels, there aren’t as many people all watching the same channel at the same time. The supply has increased faster than the demand, which has caused a drop in the price of 30-second ad spots. To make up for this drop in price, television networks have added in an extra minute of advertising per hour, and they’ve relied more and more on the shorter 15-second ads.
It is possible that we’ll see a decrease in the number of available channels rather than further increase, and if this is the case, the prices will rise again for television advertising spots. They love watching TV in America, and this love has caused the sort of growth and audience splintering that can hurt television advertising.
While there are many who argue the pros of television advertising, there are some cons to consider, in addition to the overall decline of television advertising. You may not have a large advertising budget, to begin with, and once you get an ad produced and purchase air time, your ad money might be totally eaten up. If any changes are made to your offer or product, that requires redoing your entire TV ad, which means additional money spent.
Being in a market like ours, we can learn from the big guys and adapt to changes without the risk of having to make the same mistakes. Rather than throw thousands and thousands of dollars into an advertising form that may be losing its edge, consider alternative ways to advertise. TV is slowly losing its status as advertising king, so get in touch with the Grow Digital Marketing team to find out how we can help you advertise your product and business in new, more effective ways.