This article originally appeared on The Financial Times
TV Broadcasters feel the chill as viewers switch to new media
Audiences are increasingly moving away from traditional television and migrating to on-demand services.
They are watching on-demand services, such as Netflix and Hulu and the BBC iPlayer but turning off “linear” TV, or tuning in at a set time on a set channel. This migration has been gradual but is starting to show up in the quarterly results of some of the world’s biggest media companies — and investors are beginning to notice.
Television executives started sounding the alarm last autumn when Viacom, 21st Century Fox, Comcast, which owns NBCUniversal, and Walt Disney began reporting lower advertising revenues for some or all of their networks. Todd Juenger, senior analyst with Bernstein Research, called the ratings declines “alarming” and “unprecedented”.
The trend has continued into the most recent round of financial results, with Viacom among the worst hit. The company has suffered some of the sharpest ratings declines, with viewership down 18% in the fourth quarter, according to a MoffettNathanson analysis of Nielsen data. The children’s network Nickelodeon was down 17% while MTV declined 14%.
Viacom’s, chief executive, Philippe Dauman, alluded to significant changes in audience habits. “It is no secret that there are far-reaching shifts taking place in our industry,” he said.
Channels aimed at young viewers are not the only ones being hit. Viewership among 18-to-49 year olds of primetime broadcast and cable shows — some of the most valuable television advertising available — dropped 7% in the final three months of 2014, the third consecutive quarter that audiences shrank, according to MoffettNathanson, the analysts. “This is just about the worst decline we have seen,” it said.
Mr Juenger at Bernstein Research argues that television is undergoing a “structural” migration from ad-supported networks to streaming video services. “We don’t think those viewers are coming back,” he warns.
While the TV industry struggles to hammer out new models for revenue and measurement, advertising executives say they are following consumers in expanding the definition of television itself to encompass on-demand viewing, streaming and digital video.
“I believe you have to redefine what television is. It’s more about moving content,” said Amir Kassaei, chief creative officer for Omnicom’s DDB Worldwide, an advertising agency.
“There is still the old media platform called TV, which is strong and you should use it if you need to build awareness and build a bigger audience. But the way people are interacting with moving content more broadly is changing, especially with young people. We have to be selective if we are trying to reach people in the right way.”
Shrinking live TV viewing threatens broadcasters’ bottom lines.
This week, 3m more viewers than usual tuned into watched EastEnders, the long-running BBC soap opera, as it broadcast live, writes Henry Mance.But that one-off success is unlikely to break a trend of falling live television viewing in the UK, as viewers switch to Netflix, DVDs and catch-up services. Now the question is whether advertising revenues — which have been increasing at broadcasters such as ITV and Channel 4 — will start to drop.
The amount of time that British children spend watching TV has fallen by 22% since 2010, according to industry data from Barb. Many industry figures have argued that the shift away from live TV is a kids’ phenomenon, which will disappear as audience grow older.
In fact, says Toby Syfret, an analyst at Enders Analysis, “the habits of the parents are changing too”.
Live television viewing has fallen 11% among adults aged 35 to 54 since 2010. For those audiences, the transition to on-demand viewing is often an easier behavioural shift than, say, the move from print books to ebooks. Only among the oldest demographic — aged 55 and above — has live television viewing remained relatively unaffected, falling 2% in the past four years.