As UK broadcasters report falls in advertising spend and knock on effects for commissioning, Prolific North spoke to Matt Rutherford, Head of AV at UM Manchester to find out the agency side.
Rutherford plans AV campaigns across screen formats (including linear TV, sponsorship, VOD and cinema), and has worked with clients ranging from Aldi to American Airlines and Unilever, so is in a good place to tell us whether the broadcast advertising market really is in a slump?
“For the year to the end of April (23), we have seen advertiser spending on linear TV down sharply at 10% – 15% (by supplier), and we do expect that trend to continue, making 2023 a deflationary year overall. However, it is vital to put that in the context of the 16% uplift in 2022, on top of the 11% uplift in 2021.
“It is also crucial to put broadcast TV alongside broadcast VOD, which is predicted to be up by over 4% in 2022 to almost £850m. The broadcasters have all sought to adapt their online offerings accordingly. This year, All 4 has come under the Channel 4 banner, while ITVX is a significant upgrade on the ITV Hub. It is clear that the role of the major suppliers is moving from TV channels to content aggregators.”
We have a number of things at play here, the state of the economy, but also behavioural changes, from linear to digital. So could this be a longer term trend?
“As with the pandemic, the state of the economy may act as a catalyst in shifting advertiser behaviour, and while it is too soon to write off linear TV as a medium, there are some structural factors at play. The decline in revenue reflects the declining viewing on linear, and we do not expect to see that trend change, particularly as it had been most pronounced among younger audiences,” explained Rutherford.
“However, overall reach remains strong for TV, suggesting viewers aren’t giving up on linear TV – they are just using it as part of their viewing eco-system (alongside SVOD, BVOD, YouTube, TikTok and other video formats). Viewers are becoming more platform agnostic, and TV has a place within that.”
And one of the key drivers for linear is live events.
“The massive viewing figures for sporting events (particularly the Lionesses’ triumph in the Women’s Euros) and current affairs (the Coronation delivered high viewing) illustrate there are some things people want to watch live – and TV feels the best format for that. But for time poor audiences (the trend of declining linear viewing is particularly pronounced for families), it seems unlikely that viewers will be prepared to go back to having their viewing schedules dictated to them.”
So does this mean that within agencies there has been a change in focus as well? It used to be that the television ad was at the heart of the marketing mix with everything else supporting it.
“TV’s power has been based on the emotional investment of the creative, alongside the ability to reach mass audiences. For advertisers aiming for broad audiences, TV remains the quickest way to rapidly build reach,” continued Rutherford.
“Gain Theory research has also shown that TV has a greater multiplier effect than other media, making other elements of the campaign more effective. As an example, TV makes online display 31% more effective – no other medium comes close to giving the same uplift. This centrality is illustrated by the number of advertising campaigns that use TV as the launch channel. No major grocer would dare to launch their Christmas campaign without leading with a TV spot.
“Where AV advertising has shifted away from TV is for advertisers trying to reach more niche audiences with video messages. The flexibility of targeting offered by VOD and digital formats makes them ideal for reaching traditionally tough audiences.”
Looking more broadly, Rutherford didn’t believe that the reduction in television advertising spend indicated that there’s likely to be a wider fall off in higher spend advertising/marketing.
“While it is important not to overstate the decline in TV advertising (the decline in 2023 only takes spend back to 2021 level), it does point to a shift from broadcast media to more addressable advertising formats, with more trackable results for advertisers.
“While TV offers relatively low CPTs compared to other media, the large size of the audience means that the capital cost of TV has always been high. The geographic and demographic targeting offered by VOD and other digital formats can overcome this, getting rid of the high bar to entry for video advertising.”
There is evidence already that falling advertising spend is impacting commissioning and Rutherford said he expected more brand partnerships in the future for quality programming.
“We are in a period of prestige scripted TV drama, but this ‘golden age of TV’ narrative overlooks the fact that many of these shows have relatively small audiences and the bigger formats on British TV (GBT, Bake Off, Love Island et al) are seeing declining linear audiences. With the high cost of creating new shows, we can expect to see more co-productions which allow broadcasters to share the risk (and hopefully reward) of producing new shows.
“One of the key attractions of TV advertising has always been the quality of the content, and the desire of advertisers to associate with that. If the TV stations can create engaging new content, the audiences will watch, whether on TV, VOD, clipped on YouTube or through their Apple Vision Pro set. And brands will be right there to take advantage of that engagement.”
