The age of streaming and connected TVs will keep changing the landscape, including reducing the amount of TV advertising viewers are exposed to, even at a time when streaming services roll out advertising-funded tiers. Linear TV will, for now, nonetheless remain the primary source of ad inventory, with streamers that are ad-free or use limited ads remaining most desirable to consumers.
So says a new forecast from Brian Wieser, principal at Wall Street insights provider Madison and Wall. His key finding: time spent with advertising on a TV set, including streaming content viewed that way and connected TVs, could fall 24 percent in the U.S. between 2023 and 2027. After all, “consumers of the many SVOD services generally want to choose ad-free options, (and) most of the rest of the services will inevitably be ad-light given the lack of desirability of advertising in the on-demand world that accounts for most of streaming video,” he highlighted.
Wieser, who has been dubbed “Madison Avenue’s de facto chief economist,” told The Hollywood Reporter he looked at “TV on a TV set, consistent with how Nielsen defines the data they have in The Gauge,” which provides “a monthly macroanalysis of audience viewing behaviors across key television delivery platforms,” as the ratings company explains on its website.
Wieser said his goal was to “estimate the decline in gross ratings points or time spent with advertising on TV” in this environment, using historical Nielsen data on time spent with different TV services, Antenna data on the percentage of subscribers choosing ad-free and ad-supported streaming services, plus his own estimates of ad loads and underlying assumptions.
Wieser’s forecasts provide further surprises that TV networks, streamers and marketers will all have to take into consideration as their businesses evolve further.
For example, while TV ad time will fall by 2027, total hours of TV consumption will be flat through that period, when including YouTube and “other” uses of TV sets, such as for video games, Wieser forecasts.
His other assumptions and predictions paint a further picture of how streaming is changing TV habits and business thinking. Among them: linear TV will, over the forecast period, have ad loads of 20 percent, or 12 minutes per hour, compared with around 4 minutes for the ad-supported tiers of Netflix, Disney+, Max, Paramount+ and Amazon Prime, 5 minutes for Tubi, 8 minutes for Hulu and Roku, as well as 12 minutes for Paramount’s Pluto TV. Wieser also assumes ad tier subscribers will amount to approximately 30 percent of Netflix, Max and Paramount+ in 2027 and 50 percent of Disney+, while Hulu and Peacock will continue to have “much higher penetration rates.”
The analyst described the assumptions for the drop in TV ad time consumed on TV sets in his report as “conservative.” If things play out like Wieser forecasts, by 2027, 54 percent of TV viewing would occur on streaming services, with the other 46 percent being consumed on linear services. That would mean a reversal of the current 32 percent to 68 percent split.
“Advertising’s share of TV consumption (streaming and linear TV combined) would fall from 13.1 percent of time spent with TV in 2023 to 10.6 percent by 2027,” the expert’s report predicts. “The volume of ad-supported TV time would fall by 24 percent between 2023 and 2027,” with person-hours of U.S. TV ad inventory dropping from 54 billion to 41 billion.
Even if YouTube, which he projects to hit 19 percent of total TV consumption in 2027 at its current trajectory, is included, with its ad loads averaging 6 minutes an hour, “total ad-supported TV ad inventory under this broader definition would still be down by 13 percent between 2022 and 2027,” Wieser estimates.
The Madison and Wall analyst drew several conclusions from his projections that operators of TV networks and streaming services will have to keep in mind as much as advertisers. “Low ad loads are likely a permanent feature of streaming, and low penetration rates of ad tiers will be common on many services,” he wrote.
Marketers should keep in mind that streaming ad loads account for only around 3 percent of total time spent with streaming TV, rising to around 4 percent when including Amazon Prime Video Ads and the growth in ad-supported tiers offered by streamers, he wrote. “By contrast, linear TV’s ad inventory accounts for around 20 percent of time spent with those media owners,” he emphasizes. “No matter how much streaming grows, it can never make up for lost linear ad inventory so long as ad loads remain light and consumers exhibit preferences for ad-free options for the biggest service,” Netflix.
Wieser doesn’t see a major change to this, arguing that in an on-demand world, “the choice to consume content is highly ‘intentional,’ and thus advertising is much more of an interruption and less tolerated.” Streaming services can try to increase ad loads, but doing so by much would likely lose them subscribers, the expert warned. “By contrast, consumption of linear TV features a significant volume of programming viewed in an ambient manner (i.e. as background noise or in aid of some kind of activity where multitasking is going on) and where much of sports content is consumed, and where ads fit more naturally into the flow of the programming.”
Linear TV will remain the primary source of TV ad inventory. Wieser estimated that “more than three-quarters of the medium’s total available inventory” will be found on linear TV by 2027.
Advertisers could increasingly focus on “advanced audiences” rather than traditional demographic groups given that younger viewers aged 18-49 rely more on streaming viewing.
“It’s not hard to imagine that over the course of the next five years, perhaps these younger audiences could consume 70 percent or more of their TV content on streaming services,” up from 55 percent right now, Wieser argued. “As this occurs, it’s also plausible that marketers will increase their focus on so-called ‘advanced audiences’ (targeted based on the topics they are most interested in) rather than traditional age and gender-based targets.”
And ad prices should rise. All else being equal, all this “would have a positive effect on pricing” for sellers of advertising,” Wieser said. “Although because I expect spending to be down on a year-over-year basis every year going forward, average (ad rate) increases might only rise more slightly, at least if averaged across all TV advertising formats and dayparts.”
