Why Traditional TV Is in Trouble

Television networks will draw hordes of advertisers to New York City this week for their annual bonanza of presentations and parties, a decades-old tradition known as the upfronts that is meant to dazzle marketers and loosen their purse strings.

New shows and top talent will be pitched from the stages of Carnegie Hall and Lincoln Center, followed by lavish evening affairs where marketers can eat lobster rolls and snag selfies with network stars. The fanfare will kick off weeks of negotiations, with networks aiming to get advertisers to commit to billions of dollars in spending for the year ahead.

But beneath the sparkle and the canapés, the networks are also navigating a serious advertising upheaval. Ratings are on the decline, especially among young people, some of whom don’t even own televisions. It’s hard to keep up with the many devices and apps people now use to watch shows. And there is a host of material from Silicon Valley that is competing for viewers’ attention, including Google’s YouTube, Facebook and Netflix. It all adds up to a precarious situation for broadcast TV.

Advertising on TV has long been the best way for marketers to reach a large number of people at one time. And it is still a formidable medium. But cracks are showing.

National TV ad sales peaked in 2016, when they exceeded $43 billion, according to data from Magna, the ad-buying and media intelligence arm of IPG Mediabrands. Sales fell 2.2 percent last year, and the firm estimates that they will fall at least 2 percent each year through 2022.

Some of the decline could be mitigated through new business with platforms like Hulu, but “it’s not yet enough to upset the decrease of traditional sales,” said Vincent Letang, Magna’s executive vice president of global market intelligence. At the same time, he said, while networks have raised the cost of advertising on their airwaves in recent years, ratings have declined sharply, including some in unexpected areas like the National Football League.

TV is still a good value for plenty of advertisers. Mr. Letang said pharmaceuticals and personal care products were increasing their presences on TV. But the combination of rising prices and falling viewership is giving some big brands pause.

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Source: New York Times