Cost, value and how we should plan today’s TV

Thinkbox’s Matt Hill explains how TV viewing has affected the price of advertising, what this means, and how advertisers now need to approach the medium

People know the cost of everything and the value of nothing these days, don’t they?

Well, certainly, cost has been a massive issue during the recent years of economic uncertainty – which partly explains the well-documented and concerning drift towards short-termism in marketing. Short-term survival has been more important than long-term growth.

Cost in TV has also become a talking point. This is because the cost of reaching some TV audiences via linear TV has increased, particularly younger audiences, because they are watching less linear TV. This has been an unwelcome development for advertisers wanting to reach younger viewers.

That said, TV’s value, even with a higher price tag in places, is unquestionable. TV has been ridiculous value for years. Look at the effectiveness evidence – 71% of total profit generated by advertising on 54% of the budget, and it does this at the greatest efficiency (a profit ROI of £4.20), and for the least risk.

But TV is changing, questions are being asked and they need addressing. So, in this article, I will set out how TV viewing has affected the price of advertising, what this means, and how advertisers now need to approach TV.

The fact is there is no replacement for what TV advertising does. Luckily, though, TV still does what TV does.

TV’s digital transformation

TV is not alone in having seen a decade of disruption, but its disruption gets a lot of attention. Perhaps this is because everybody watches TV, so everybody has a view. It is also the most famous form of advertising, so change is very public.

There has been more change in TV during the last ten years than in the previous 50. The sheer amount of TV there is to watch is one thing, but also the way we watch it. TV has been digitally transformed.

Subscription VOD arrived and went from zero penetration in 2010 to 58% in 2019 (it is around 10% of all video viewing). Connected TVs had a similar trajectory, from less than 20% of households in 2010 to over 70% in 2019. Broadcaster VOD services, too, have soared: ITV now has over 30 million registered users, for example. And YouTube – not TV, but relevant to TV’s story – has further carved out roles in our lives, being used for an average of 5 minutes a day in 2010 to over 30 minutes a day in 2019.

The re-distribution of TV

All this has had consequences for linear TV viewing to commercial TV channels. The headline story is that some linear viewing has been re-distributed online, mainly to SVOD services like Netflix and to the broadcasters’ own VOD services.

We shouldn’t forget that the broadcasters themselves have driven this change, making it possible for people to watch TV however they like.

As 2020 unfolds this will be a fascinating space to watch. Following BritBox’s launch late last year and with Disney+ launching in March, we’ll see the most valuable back catalogue content being taken back by the rights holders and the streaming wars will have begun.

The headline for advertisers is that this re-distribution of viewing has resulted in declines in the number of TV ads viewed through linear TV. Crucially, though, this has been restricted to younger demographic groups. Older (and richer) audiences are watching pretty much the same number of TV ads they were 10 years ago.