RTL AdConnect is RTL Group’s international advertising sales house. At RTL AdConnect, we approach TV as a driver of innovation. Over the decades, we’ve seen and participated to the redesign of a network where TV is Total Video, where your daily fix of your favourite content spreads across platforms, from one screen to the next, where watching content is a journey.
We’ve come a long way since TV Key Facts’ first publication in 1994, and despite the industry predicting the demise of TV for the last decade (or so it feels), the bottom line is the same. TV is still alive, kicking, evolving and constantly reinventing itself. It gives us a chance to sit back and reflect on how far we’ve come and help predict what the next coming years might look like for TV – from AVOD to SVOD, from programmatic to addressable and beyond.
Over the next few pages we’ll analyse the trends, challenges and opportunities to success and differences between countries on everything from brand safety and ad tech to measurement and the impact of GDPR. We tried to look back and forward 25 years, bringing together insightful research and articles written by international media experts from renowned companies across the industry.
The TV industry always had a privileged position in the advertising market, but the world is changing and online giants combined with an evolution of the media consumption are pushing broadcasters to rethink the way they address the new expectations of advertisers and consumers.
For several years, broadcasters have been driving forces to keep up with the technology side and they are succeeding where digital is struggling. But the pressure on broadcasters is still at its peak, with data-driven insights and precise TV audience targeting soon to be a must-have. We see alliances being created, regional or local broadcasters are teaming-up to face a more global competition.
There has never been so much data to measure and learn from, and TV can deliver more precision in measurement and user data, while offering brand save environments and access to premium contents. So many possibilities to access video content are today available thanks to technology, broadband penetration and new mobile and connected devices. The new battle is the battle for attention of the consumers. Broadcasting and digital offers both bring valuable strengths to the market; they are complementary, not competitive. The mix of reach, scale, precision in measurement in TV, and precise targeting, flexibility, rich data for the digital, makes for impressive results.
Still, TV is unrivalled when you think about its incomparable reach, quality content production, ad effectiveness, ability to innovate through addressable TV or OTT, new ways of programmatic buying, virtual reality, and its ability to adapt to all audiences. On average, in prime time, it’s 263 million viewers that sits in front of their screen to watch TV, and it is responsible for 71% of the total profit generated by advertising.
We see no slowing down of “institutional” TV events gathering very wide audiences year after year, such as the Super Bowl attracting 112 million viewers, or the Chinese Spring Festival with 169 million viewers. We also see incredible performances on new programmes such as BBC’s Blue Planet II series, which attracted 14 million viewers, the biggest audience of the year in the UK. Look again at the incredible audience results generated by the World Cup in 2018.
On a daily basis we’ve seen a decrease in TV consumption over the last five years. But looking at the larger scale from 1993 to 2017, the level of global TV consumption is still on par with that of 25 years ago and even at its steepest point in decades in Europe!
Mobile, OTT, addressable, new on-demand services or vMVPDS will bring Total Video to the next level and address all target groups. And at its very centre: more formats, originals and quality content. TV is powerful, efficient, cost-effective and brand safe. It’s not going anywhere… It’s going everywhere.
Some pubcasters have developed a play along application which users can experience during the programme’s linear TV broadcast. In July 2017, ARD, the German pubcaster, created a mobile app for the game show Wer Weiss Denn Sowas?. The ARD Quiz app sent a notification to its users before the show started. At home, the viewers could answer the same questions that were asked on the show. At the end, 3 randomly chosen players won 50 euros.
Conversely, trending mobile games mimic daily TV shows in which anyone can play to win money. They’re based on the same format as television series – they have hosts, daily live shows, and contestants have to answer general knowledge questions correctly to earn cash and prizes. The US-based production company, Intermedia Labs, launched HQ Trivia created by Vine co-founders Rus Yusupov and Colin Kroll. The app broadcasts live shows with a real host at 3p.m. on weekdays and everyday at 9p.m. During the 15-minute shows, smartphone players have to answer 12 multiple choice questions correctly in order to win. Inspired by the traditional game show Who Wants to be a Millionaire, HQ Trivia reaches more than 1,500,000 players simultaneously.
HQ Trivia competes with live mobile game shows such as The Q, and its success has led to local adaptations. HQ Trivia’s French equivalent, Flashbreak, is broadcast daily at 7p.m. Backed by venture capital, HQ Trivia has recently inked advertising deals with Nike and Warner Bros, whose film Ready Player One was promoted by the app, including questions related to the film.
Our way of bringing moments together is evolving thanks to the democratisation of technology. Virtual Reality and Artificial Intelligence raise the bar by providing more data to viewers who can learn more and play more. For instance, the French broadcaster TF1 launched an app MyTF1: Coupe du Monde de la FIFA allowing viewers to watch the World Cup in Virtual Reality, accompanied by live game stats and a replay option for the goals and key plays.
Meanwhile, for the 2018 edition of the French Open, the French telco company, Orange, put forward two creative ideas: Holotennis, where fans can play against the hologram of an opponent on the famous Philippe-Chatrier court, and the virtual tour Look Around. Using a 4K touch screen, visitors get access to areas closed off to the public in real life. Throughout the tour, the visitor is accompanied by an AI guide that answers any questions they may have about the site or the history of the French Open.
Online players are relying on innovative strategies to reinvent television formats and take advantage of digital assets. Live events are no longer exclusively dedicated to TV screens, and non-linear broadcasting channels may catch up with the same rallying power. Virtual Reality seems to be a leverage for innovation, already giving us a glimpse of what’s on the cards in the next few years. x
By the time September comes, more than half of the children under age 13 have already hinted about their Christmas wishes. The proportion steadily rises as Christmas gets closer: in mid-November, almost ¾ of the children have commented on what gifts they expect from Father Christmas. But when it comes to shopping, parents lag behind. In September, only 15 percent of parents start to buy at least some of the gifts their kids want. However, the number also increases—though slowly—leading up to Christmas. Parents are often "last minute" buyers: even in mid-December, only two-thirds of parents on average say that they have already bought gifts. This could also be because their offspring are still changing their mind up until Christmas Eve. The kids prove to be savvy: no matter how much money their donors are willing to fork out, the gifts must be well chosen.
Especially for more expensive wishes, both friends and television are the most important sources of inspiration for which products children want under the Christmas tree. With friends, they can try out the products directly, experiencing first-hand how something looks and how they can use it. Television is an almost equally as influential with similar benefits. The advantages of a product can also be shown on TV and seeing kids play on a TV spot can show children how it’s used.
Christmas is full of high expectations. Families celebrate the magic of Christmas with shared rituals such as decorating the Christmas tree or building a snowman. But above all, it’s the glow of children's eyes when the gifts are unpacked. However, parents are disciplined at first: about half of them say that gifts should not exceed a predetermined limit. Overall, parents perceive the average value of all the gifts that a child should get for Christmas from September to December will be between 221 and 229 euros, only to determine after Christmas that their gifts eventually came to 251 euros. Not surprisingly, the biggest gift givers are the parents, who contribute with an average of 111 euros, but the grandparents, who contribute a considerable 71 euros. The rest is contributed by uncles and aunts, friends of parents or siblings.
On top of to the 251 euros a child might receive at Christmas, gifts worth an average of 65 euros are given on St. Nicholas Day. This is included in the gift-giving ritual, as a quarter of all kids articulate what they’d like for this festive day starting in September. The same applies to Easter, where another 92 euros in gifts are bought. Half of all children who were given gifts for Easter had told their parents what they’d like in the days and weeks before.
All three festive days – Christmas, St. Nicholas and Easter – have one thing in common: typically, parents not only buy what’s written on the wish-list. In almost every product area surveyed, children receive more gifts than they wanted. More clothes, books, creative or construction toys can often be found under the Christmas tree than they were expecting. Parents seem to compensate for the fear that the special day could be a failure by not meeting the children’s expectations.
Despite the recent revolution of digitalization: linear Tv is still the most important media inspiration to trigger gift desires, even starting in late summer. Brand and product communication should therefore be active throughout the year. In November and December, sales promotions are likely to give parents assistance in checking off the products of the Christmas list. The parents' tendency to over-compensate when shopping also offers communications opportunities. Advertising can help parents as well as children find the right product. This also applies to St. Nicholas Day and Easter, especially as the advertising focus is more geared towards Christmas, and could be boosted for other holidays. This also gives advertisers with a lower media budget the opportunity to actively advertise during these pre-holiday seasons, to avoid being over-shadowed by advertisers with larger budgets. x
In 2017, 51% of the Russian urban population regularly (at least once a week) watched different types of online video content. This habit is almost universal among young people: in 2017, 77% of 15-34 age group regularly watched VOD online. The video menu offers all sorts of video on demand, including professional video (movies, TV series), semi-professional video (produced by vloggers, for example) and various UGCs. The readily available access to new forms of video is inevitably at the expense of TV viewing. Ad budgets follow suit with new publishers.
Outside competition for the TV industry is just one part of the story. TV content (live and on demand) is now available on numerous digital services and lots of people watch TV on multiple screens, “anytime, anywhere”. Needless to say, these viewers often slip under the radar of the TV audience measurement system.
Challenges across the Russian market stem from TV regulation legislation and decisions made by different market players early on in the digital period. According to the “must carry” regulation, Pay TV operators have to provide a package of 20 TV channels (the most popular) free of charge. It comes from the idea that TV is a “public good”, a notion from the shortage period and is still present in the digital era. The combined share of these 20 TV channels in 2017 accounted for 79% of TV audience1.
About ten years ago – adhering to the “public good” concept and upholding the modern “digital” image – many TV channels made their live “on demand” broadcasting and content available for the viewers via OTT also free of charge with no subscription required. Pirates didn’t miss the chance to develop hundreds of platforms, fill them with TV content (live and on demand) and make a living from trafficking and commercials.
As a cumulative result, TV inventory gradually and painfully decreased for the market. Every year, a typical TV advertising campaign needs more and more GRPs to reach the same target goals. For example, to reach 80% of the 14-59 age group across all TV channels, it took 280 GRPs in 2006 and one and a half time more in 2016 – 430 GRPs. The audience moves towards online and digital services while ad budgets follow suit, but publishers aren’t reaping the benefits. At best, publishers receive 30% to 40% of ad budgets, accumulated from online TV content.
The main objective of the Big TV Rating product is to provide a more suitable setting for TV channels’ online development using different OTT-services.
The solution is to provide advertisers with high-quality inventory of professional and brand-safe TV content, regardless of the distribution environment. To put the project in place, TV channels keep the same schedule with ad blocks and the same commercials across all distribution environments, live and 7-day catch up. To make the number of online views visible for the measurement system, TV channels install Mediascope “heartbeat” tags on play lists at a frequency of 30 seconds, and special scripts for the players. After a 7-day period, TV channels cut the commercials from catch-up content and monetize the content as online video.
Big TV Rating provides the market with a unified TV inventory (the same GRP at a unique price) and the full kit of marketing tools the market is used to. The unified TV inventory is available for media planning, buying/programmatic buying and reporting GRP on the ViMB platform.2
Rolling out the new product in 2018 brought incremental TV inventory to the market and helped reduce the tension caused by its ever-increasing shortage. Sales houses hopefully see it as a means to reduce the sell-out in the upcoming year from 100% to 95%. TV channels participating in the project earned an added profit and learned much more about their shows’ online content consumption. The project started in January 2018 with 4 TV channels participating, and 7 TV channels are expected to be on the Big TV Rating list by the end of 2018.
At the moment, Big TV Rating measurements are limited to desktop consumption of online TV content. Mobile TV viewing is set to be measured in the second half of 2018. The product is promising for the market on the whole, though slightly unsure for advertisers, who currently get all the mobile impressions for free. There’s no doubt that comprehensive, detailed information about the advertising campaign is worth way more than a freebee giveaway. x
WARC has been monitoring the shifts in global ad spending for over 35 years, working with research agencies and industries in 96 countries to collect the best possible market data. In most cases, data is collected in a media survey, where media owners and publishers supply current advertising revenue figures for analysis each year. Data is net of any negotiated discounts, including agency commissions and excluding production costs, aiming to provide the most accurate scope possible. We’ve sifted through this data, alongside projections from WARC’s customised forecasting tools, to outline the following trends in advertising across the US and the EU.
The scale of the US advertising market is phenomenal: we believe a record €174bn was spent in the US last year, approximately €534.17 per American (compared to a per capita spend of €208.13 in the EU). This total excludes direct mail and events sponsorship which, if counted, would make the ad market’s value equivalent to about one third of the country’s defence budget. The market has been expanding at a compound rate of about 7% each year since the global financial crisis in 2009. In fact, it’s grown by €54bn in the last five years alone. The outdoor, cinema and online markets are consistent engines of growth in the US, while TV provides a boost every other year. At €103bn, the EU’s advertising market is approximately 60% of that of the US. Growth has been fairly steady at about 1% on a compound basis each year over the last decade, except for a 0.9% contraction in 2012, partly due to the European debt crisis. The UK is the bloc’s largest market, accounting for €23.6bn – or 23% – of last year’s total. Underlying growth in the EU ad market averages at half a per cent, excluding the UK. Germany is the largest mainland market, holding €20.6bn or 20% of the total, followed by France (€13.0bn or 12.6% respectively), Italy (€8.1bn, 7.9%) and Spain (€5.6bn, 5.4%).
At €60bn, the amount spent on TV advertising in the US last year was two and a half times greater than the amount spent on advertising across all media in the UK. The US TV market is cyclical, boosted every even year by heightened investment from brands aiming to reach a wide audience during major sporting events (such as the Olympics), as well as ad spending by political parties during the presidential and midterm campaigns across free-to-air channels. TV’s share of the US ad market has dipped by just 1.5 percentage points over the past decade up to 2017.
The EU’s TV market is about half the size of the US. In total, TV advertising was a €32bn business in the EU last year, and its share has also been remarkably steady over the long term: it was 32% in 2000, and just under 31% in 2017. This rate stays strong despite the rise of the internet ( desktops, mobiles and tablets), which has grown from a share of just 1.2% to almost 40% over the same period.
When measured in total spend, the internet became the largest ad medium in the EU in 2016 (this happened a year later in the US). However, the top line measure is deceptive. The majority of internet spend (46%) is search, according to IAB Europe. When this is taken out of the picture, along with classified advertising (approximately 16% of the online total), the amount spent on display formats online is still only half of the TV total. A similar picture can be seen in the US; at €35bn, the online display market is some €25bn smaller than TV.
Yet, TV’s command of the European display market is even stronger when the online total is broken down by platform; it’s ranked a full 28 percentage points ahead of the second-largest display medium, desktop internet. Perhaps the most surprising thing to note here is that TV’s share of display advertising spend has actually grown in the EU since 2000, by around three percentage points. Despite the popular misconception that online advertising has been drawing money away from TV, data shows that the internet’s growth has instead come almost entirely at the expense of print. After a decade of battling for the win, 2017 became the tipping point, as online display overtook print display for the first time in the EU. This landmark was reached in the US in 2015.
Growth in online display investment is being driven by a number of formats aside from traditional banner ads, including online video, social and content/native, though there is overlap between all three. In the US, online video amounted to approximately €12bn in 2017, some 34% of total online display spend. This share has doubled over the last five years.
Within the EU markets, online video’s share is highest in the UK, at around 36% (€1.7bn). As with the US, video share of online display has doubled in the UK since 2013. Video share is also high in Italy, at just under one third, and while shares in France (19%) and Germany (18%) are lower, they’re steadily on the rise.
Investment in advertising on social platforms, including some of the video spend mentioned above, is also growing rapidly. In the US, almost €21bn was spent in 2017; approximately the same amount spent on radio, outdoor and cinema combined. This figure has doubled in just two years, fuelling a strong rise in the overall online display market. In the UK, social spend reached €2bn last year, up from €1.5bn in 2016 and €1.1bn in 2015 despite a weakening pound over the last few years. As with the US, the rise in social spend is driving a wider online display market in the UK.
WARC’s Global Marketing Index, a monthly survey of CMOs which gauges marketing budget growth, trading conditions and staffing levels, collected data which shows that marketing budgets are particularly resilient in Europe. We can see that budget growth has been positive each month since September 2013, with some of the highest index levels on record in the EU in the first three months of 2018. Budgets across the Americas also rose in 2018 after a long period of contraction, which was mostly due to softness in Latin America.
WARC expects the key markets in each region to grow in advertising investment this year when measured in Euros, ranging from 5.1% in the US to 1.1% in France. Mobile will continue to underpin total market growth across the board, and we anticipate a good year for TV, with the FIFA World Cup being broadcast in a time zone favourable to European markets. x
For several seasons, the nostalgia and retro programming trend has been growing within the scripted content landscape. Linear and digital platforms have invested in drama series which have an established history with viewers, with hit series returning with their original cast (The X Files, Will & Grace), whilst others are redeveloped for a new generation (Magnum PI, MacGyver, Lost in Space). In the flush of annual commissions the importance of non-scripted programming in schedules is often overlooked, however entertainment has consistently delivered on the nostalgia trend for far longer, providing schedule tent poles for broadcasters and delivering live, engaged audiences for advertisers. Those formats which successfully return year after year do so because they deliver both for broadcasters and for viewers; for viewers they are familiar, dependable and entertaining points of viewing amid the myriad of content offerings; for broadcasters, they bring in significant, engaged audiences within the key live plus same day and live plus three viewing windows.
American Idol is a great example. After being off-air for less than two years, the show returned to US television screens in 2018 for its sixteenth season. The show’s value for both broadcasters and viewers was immediately apparent; American Idol delivered ABC’s highest rated Sunday night premiere in four years and commanded a reported $200,000 for a thirty second spot. The show highlighted that content, not platform, is king – with audiences and advertising dollars following the entertainment format to its new network and new night. The data clearly shows that viewers had been missing the annual event’s appearance in their TV schedule, with the original reality competition show returning to its roots – delivering a nostalgic viewing experience that deals with universal truths and the American dream.
Viewers continue to frame their viewing schedules around these unmissable, long-running entertainment formats. As American Idol delivers viewers on ABC, The Voice, now in its fourteenth season, continues to bring in viewers for NBC. Dancing with the Stars (ABC) delivered viewers in its twenty-sixth season, with a junior version commissioned for the 2018/19 season, driving both the audience that has grown with the show and aiming to bring it to a new generation. America’s Got Talent has delivered for over twelve seasons, achieving its highest performance to date and ranking as the number one most watched entertainment series of the 2016/17 season. America’s Got Talent also delivers on the nostalgia of people chasing their dreams, driving summer audiences and ad spend. Building on this audience engagement, America’s Got Talent: Champions will launch in the upcoming Winter season, providing further points in the schedule for audiences to engage.
During the summer season, when viewers have proven to be more elusive, nostalgia programming can absolutely drive viewing. Building a night around retro game show brands, in the case of ABC’s Sunday Fun & Games, boosted viewing levels, achieving the network’s highest summer Sunday night ratings in ten years and creating a destination viewing evening in the typically lower summer viewing period. All the shows in this block first aired over forty years ago; Match Game for example last aired new episodes seventeen years prior. Tapping into this family-friendly, established programming enhances viewer engagement and boosts the live TV appeal. Audiences are more likely to view a show either within the live plus same day or live plus three environment, making this a strong strategy for driving broadcaster ad revenue and attracting major brands.
Although these shows have an established heritage with viewers, there is no room for stale or stagnant formats. Striving for innovation while honouring a show’s DNA is key. In 2018, American Idol drove innovation into its return by becoming the first reality competition series to allow viewers to watch and vote simultaneously across all time zones. The impact of this strategy increased the week on week audience by fifteen per cent, leading to more engaged viewers nationwide, removing the issue of spoilers, and allowing both coasts to see the outcome in real time.
In a crowded content landscape, established entertainment brands continue to command a live engaged audience, serving as the framework around viewers’ TV schedules. The combination of nostalgia and innovation drives more engaged viewers watching within the key live plus same day and live plus three viewing periods, with more than eighty per cent of entertainment show viewing taking place live plus same day, and nearly fifteen per cent catching up within three days. These elements are key for brands who seek engaged, high-volume audiences, allowing scalable campaigns to be built around these annual events. x
In 2017, almost 1/3 of prime-time hours on average were dedicated to entertainment among the 90 channels1 and 11 TV markets covered by our Entertainment Report. This represents a total of over 37,000 hours of programming dedicated to entertainment, 2% higher than in 2016. New shows were successfully introduced in some countries, such as Israel, where 3 new hits ranked among the 15 best-performing prime time shows, and in the United States, with 4 new hits including World of Dance, ranking #5 on NBC (a homegrown production distributed by NBC Universal Studios) and the local adaptation of Hunted from the UK (Endemol Shine Group).
Only 14 new shows appeared among the top 15 shows in prime time across the 11 TV markets studied, much lower than in the previous year (23). Even more importantly, no new shows made it to the top 3 best-performing shows by country. The number one spot is often clinched by “superformats”; very strong brands who’ve had a long streak at the top of the ranks, and are an average of 9 years old in the countries where they’re number one. With the exception of The Voice, which is #1 in Spain and France, these programmes were created in the 2000’s.
Now, entertainment shows face a paradox. They’re still going strong despite the lack of new shows becoming global hits in recent years. To some extent, the focus may shift to more homegrown productions. Local productions undoubtedly make the most of the prime-time slots. Among top-tier channels, more than two thirds of the shows that air in prime-time are now locally-created content, a proportion that’s been rising over the past three years. The situation in the US specifically is a lot different between the Networks and the Cable channels. On the Networks, which mostly broadcast competition shows (76%), foreign formats’ adaptations tend to be very popular. It remains, that 62% of what airs in prime time is original content, a proportion which has increased in the past 2 years, where. On cable channels 96% of what is aired is local content, mainly factual entertainment.
The Dutch magic show, Mindf*ck, became the second most watched local show in the Netherlands, just under The Voice, after being moved from NPO3 to NPO1 following successful ratings. In Germany, the auction show Bares Für Rares – first released as a “lunch-time show” on Sundays – moved to a prime-time slot in June 2017 for 3 episodes. Today, it’s ranked as the 2nd best performing entertainment programme in the country.
Lots of concepts are tested every year before hitting the screen. Our monitoring tool, NOTA (New On The Air), exhaustively detects new recurrent programmes in over 550 channels and SVOD platforms in 48 territories. In 2017, it listed over 1,200 new entertainment shows. Looking at the keywords that define them best, we find that ‘talent quest’, ‘challenge’, and ‘celebrity’ are decreasing, while keywords that reflect real life, such as ‘comedy’, ‘factual reality’ and ‘social experiment’, are on the rise. The World According to an 80 year-old, is a great example of a social experiment mixing up with more comedic elements. Launched earlier in February 2018, the reality series follows eight seniors living in a modern house, with four hipsters. And they get up to a lot of things, which tends to be really funny! The show worked both on all individuals (hitting a market share 29% above the usual SBS6 prime-time average in the first month of broadcast) and on 20-34s (+19%). Upcoming in the social experiment is promising The Recording Studios currently being developed by Fremantle Media in Denmark (DR1), the UK (BBCOne), Australia (ABC) and Belgium (VTM). In this show, ordinary people are getting the chance to record the most important song of their life. In the comedy category is also to be mentioned Lief Dagboek (upcoming on RTL4), which offers people the chance to go on stage and read extracts from their teenage secret diary. The show is based on the success of the US theater play and documentary Mortified Nation. This kind of entertainment tends to be more local, and therefore may have less super format potential, but provides new ingredients for smaller formats. We’ll be sure to keep an eye on these trends in the upcoming seasons. x
One of the reasons is that young people, especially young men, are betting on sports matches, and watching live TV contests where they have “skin in the game.” In some countries, up to one third of all TV viewing by the youngest viewers is due to this factor.
Not all millennials are watching sports on TV. In fact, they are less likely to watch TV sports than older viewers in the US. As can be seen in the chart on right, about 13% of viewers 18-34 watched no sports in 2014, while the comparable figure for those over 35 is about 4%. But if we flip those numbers on their head, we see a much more important truth: 87% of American millennials ARE watching TV sports (and an astonishing 96% of Americans over 35 do so.)1
Although the average age of sports viewers is rising2, when we look at reach (as opposed to time spent), the percentage of millennials who watched the NFL in the 2016/2017 football season actually rose two percentage points, to 67%. That’s right: two thirds of all millennials watched the NFL last season.3 Although millennials are slightly less likely to define themselves as “committed” sports fans (38% compared to 45% for Gen X) those fans are still watching about 3.2 live games per week.
But what about ratings? According to the same study, NFL ratings for millennials declined 9% in that season, which certainly sounds troubling. But when put into context, that may not be so bad: total live and time shifted US TV viewing by 18-24 year olds fell by 11% and 16% year over year in the quarters that matched the NFL season. And in the four Nordic countries, total TV viewing by roughly similar age groups fell between 25-35% in 2017 compared to 20164. Moving on from American football, NBA basketball saw ratings rise in the last year. In fact, for the 18-34 year old demographic, viewing was up 14% year over year5.
Globally, gambling is an industry of roughly half a trillion dollars. Betting on sports tends to be about 40% of the total market, or around $200 billion per year. One report estimates sports betting will grow nearly 9% per year between 2018 and 20226. In the UK, sports betting had £14 billion in turnover in 20177. In the four Nordic countries, legal gambling of all kinds was about 6 billion euros in 20158. One estimate (which seems high to me) says that US betting (mainly illegal) on professional and college football is $93 billion annually9. For comparison purposes, 2017 NFL revenues from all sources was about $14 billion in 201710, which suggests the wagering market is 4-5 times larger than all gate admissions and TV rights combined. So, gambling on sports is a big deal…but what does this have to do with TV viewing? In 2016 and 2017, I conducted a series of focus group discussions with 200 millennials in France, Sweden, Denmark, Finland, Norway, Canada and Ireland, with the majority of the subjects being in France and the Nordic. The focus groups had both qualitative and quantitative aspects. In our Nordic focus groups, there were several striking findings.
1. Although average rates of millennials gambling at least once per year (this is pure gambling, and does not include lottery play) were about 34%, there was a strong gender divide, with men much more likely to gamble. On average across all Nordic countries, over half of young men gambled and only about 10% of women gambled. See chart below.
2. There were also country differences, with higher gambling rates for both men and women in Norway and Finland: three out of four Finnish men in our study gambled. This finding is supported by other research which shows higher gambling rates (not just for millennials, but for the whole population) for Finland, with 80% of those 15-75 gambling annually (this figure does include lotteries)11.
3. From the focus group discussions, the gambling breakdown for Nordic millennial men who gambled was roughly as follows: about a quarter were annual gamblers, perhaps playing in Vegas once a year or equivalent. Another quarter bet once a month or so, often games such as online poker or playing cards with friends for real money.
4. But half of them were betting on sports (or 30% of all the males surveyed), and doing so weekly, with about half of those betting daily (or 15% of the total), especially when the sport(s) they preferred gambling on were being played. Sports mentioned focused on football/soccer (not a surprise), ice hockey (not a surprise in the Nordics) and US football and basketball (which was a surprise).
5. Key Finding: among those heavier gamblers on sports betting (roughly 15% of the Nordic millennial men) almost all of them mentioned that they watched all or almost all the games they were betting on live. A few said they used online services to follow matches, but the vast majority watched the games on traditional TV. This viewing could be at home alone, at home with friends, or out of home and in public places like bars. They also added that they didn’t watch much traditional TV aside from sports.
Using the observations above, let’s take a look at Finland. If 20% of millennial men (or 10% of the millennial population of both sexes) watch seven live matches per week on TV that they have wagered on, at 2.5 hours per match (high for football/soccer, but low for US football, basketball or ice hockey) then that would be 17.5 hours per week, 1050 minutes weekly, or 150 minutes per day. If no one else in their age group watched any TV at all, the viewing of live sports by these gambling young men would generate an average of 15 minutes per day for the total millennial population.
This isn’t much, one might argue. Except that the Finnish media measurement data says that those aged 15-24 watched only 48 minutes of traditional TV daily in 2017 (which is down 54% from the comparable number in 2006 of 105 minutes.)12 Therefore, if the kind of back-of-the-napkin assumptions above were true, nearly a third of all TV viewing by 15-24 year old Finns would be accounted for by young millennial men who had bet on a game and watched it on TV to see if they had won or lost!
This all sounds a little theoretical – is there any evidence suggesting that gambling drives as much TV viewing as suggested above? We don’t have data for Finland, but if we look at TV sports viewing data by age and event in Sweden13, we see an interesting trend. Young people (both genders, ages 18-34) under-indexed watching some TV sports and were either less under-indexed or even over-indexed on others. Events like the Olympics, IAAF Championships, tennis, handball, and others are watched much less by 18-34 year olds than by the population as a whole. On the other hand, matches like soccer and NHL ice hockey show much narrower viewing gaps. Not to put too fine a point on it, but sports that people bet on seem much better at drawing 18-34 year old viewers than sports that people don’t normally place bets on.
1. Deloitte will be writing more about this topic, as part of our TMT Predictions 2019 report, for release on 11 December 2018. As part of that report, we will have more statistically robust sampling, asking over 10,000 people in ten countries about their habits around gambling on sports and TV viewing.
2. Pending that analysis, it seems likely that some part of traditional TV viewing is being driven by millennials (mostly men) betting on sports and watching the matches they have bet on.
3. It seems probable that this may make TV viewing more resilient than some critics expect. Live TV sports viewing motivated by gambling may provide support for overall TV viewing statistics for younger demographics, either slowing the decline somewhat, or perhaps even providing a floor.
4. This effect may significantly vary by country. Although we saw some variation in gambling habits of millennials within the four Nordic countries, in our French survey we observed that betting of any kind (let alone betting on sports) was extremely low in the millennial/Gen Y population14. In fact, no French millennial males in the survey said they gambled weekly. If point three above is correct, we might expect to see millennial TV viewing be less resilient in countries with less of a gambling culture.
5. Although all markets matter, the US TV market is the world’s largest, at around $250 billion per year (for TV broadcasters and distributors). TV sports are a big part of that market, and although gambling is big in the US, it is largely illegal gambling at present. The US Congress is currently reviewing the gambling laws15, and any measures that allow American millennials to gamble more easily or more often could have an effect on TV viewing, and likely a positive effect. x
The near universal availability of smartphones and over-the-top TV connections are causing dramatic changes in media behavior, and it's no longer restricted to younger generations. The rate of “Cord Cutting” – households cancelling their subscriptions to cable/satellite pay TV (Multichannel Video Providers Distributors or MVPDs) – suddenly accelerated in 2017 as the MVPD industry lost more than 3.5 million households (dropping from 100.5 to 97 million homes). MVPDs and broadcasters have designed “skinny bundles” of cable networks, available online (e.g. Dish's “Sling”), to win back cord-cutters with the concept of linear TV bundles. They've had some success, but it did little to mitigate the decline in the penetration and reach of many cable networks in the last three years.
The decline in linear TV consumption continued in 2017. Typical ratings on broadcast networks are half of what they were just five years ago, and, by the end of the current broadcast season, MAGNA expects the average primetime rating (adults 18-49) to be under 1.0. In 2008, the average American between 18-49 was consuming 35 hours of video entertainment per week, 32 hours of which were live television (an all-time high). In 2018, Americans consume 55 hours of video on various screens, live linear TV down to 18 hours, while on-demand video consumption is growing (64% of households subscribe to at least one SVOD service).
Meanwhile, the demand from advertisers remains robust. In fact, in 2017, a number of TV-centric verticals (food, drinks, personal care, pharmaceuticals, film releases) not only maintained the share of national television in their advertising budgets but increased it. Shrinking supply and stable demand mechanically leads to CPM inflation and, indeed, we've seen CPMs grow by an average of 10% per year across national TV over the last five years. In a good year (e.g. 2016) double-digit CPM inflation would offset double-digit rating deflation, stabilizing advertising revenues as a result. But that wasn't the case in 2017 as the ratings crisis worsened.
National television advertising sales were down -2.2% at $42 billion last year, according to MAGNA estimates (excluding the incremental ad sales generated by cyclical events e.g. Summer Olympics of 2016). No industry segment was spared: English-speaking broadcast networks' Net Advertising Revenues (NAR) decreased by -3%, Spanish networks by -7%, and cable networks by -2%. Local television ad revenues declined by -14% at approx. $20 billion, mostly due to the lack of political spending (following the election cycle of 2016) but non-political ad sales decreased too, by approx. -4%.
This year (2018), MAGNA anticipates that television broadcasters and stations will benefit from additional ad spend generated around cyclical events: Mid-Term elections ($3 billion of political spend), Winter Olympics (600 million) and FIFA World Cup (200 million). This will help national TV stabilize its ad revenue (+0.2%) and local TV grow its ad sales by nearly 10%. Television sales houses can mitigate the stagnation in traditional linear ad sales by better monetizing digital on-demand viewing platforms (e.g. Hulu and Full Episode Players on mobile devices and OTT). MAGNA estimates TV advertising sales houses generated approx. $1.7 billion of NAR from those platforms in 2017 (+12%). That growth, however, is not enough to offset the bigger erosion in traditional TV ad sales and stabilize total, cross-screen television advertising revenues.
In terms of programming there have been few winners in the 2017-2018 season so far. The number one show was, yet again, The Walking Dead on AMC. The Walking Dead made television history in 2012 when it became the first cable show ever to top the year's ratings, beating broadcast shows. However, with an average rating of 3.4 (live+same day, ages 18-49 with 7.8 million viewers – 11.7 million when adding DVR), season 8 was down by -30%, showing that not even popular shows are immune from the general and dramatic fall of ratings.
The reboot of Roseanne on ABC in March 2018, bringing back the same cast 20 years after the first series, was the top rated new sitcom this year. It's been the most successful reboot by far in the long list of trials over the last few years (X-File, McGyver, Will and Grace, Hawaii 5-0, 24 etc.). The Roseanne reboot also made headlines as an attempt to target white working class families who, some have argued, had been under-served by TV programming in recent years while several shows focused on minorities with some success (ABC's Black-ish and Fresh Off the Boat). Roseanne was nevertheless cancelled by ABC in May, following a racist tweet from the star of the show Roseanne Barr. That was the latest example of television programming getting embroiled in the bitter “culture war” and toxic political environment affecting the US in the last two years, as Roseanne Barr, a left-leaning working-class actress twenty years ago, went on to embrace Donald Trump's politics and rhetoric.
Among other successful new shows are The Good Doctor on ABC (highest rated new drama) and Young Sheldon (a Big Bang Theory spin-off) on CBS. Meanwhile, the highly emotional drama This is Us on NBC remains the second highest rated show on broadcast TV and one of the very few shows whose ratings grew over the previous season despite the general ratings erosion.
2017 also kicked off an unprecedented wave of mergers and acquisitions in the television industry, which remains, for now, less concentrated than most European media landscapes. ATT/DirecTV just won the court approval to acquire Time Warner (Turner, HBO, Warner Bros, etc.) for $85 billion, despite the opposition of the Department of Justice (DOJ), and this decision is likely to trigger more consolidation in the industry. Producers and broadcasters of premium television and movie content need to increase scale to fend off the multiple threats of Netflix, YouTube and Facebook. Disney seems set to win a bidding war against Comcast/NBCU to acquire most of Fox's assets for $71 billion, after getting approval from the DOJ. The Burbank company is keen to strengthen its catalogue before launching its SVOD service in 2019, when Disney movies and series will no longer feature on Netflix. Discovery bought Scripps. Meanwhile the MVPD sector has consolidated around Comcast, Charter and ATT (66% of the combined market share) and local television has consolidated around Sinclair.
A consolidated television industry may have the resources and scale to successfully develop new, more sophisticated advertising products which would enable brands to leverage consumer data in linear television campaigns, as they do today with digital media formats. MAGNA forecasts that “Advanced TV” advertising sales will grow by +40% this year to reach $2 billion. That includes 800 million dollars in household-addressable linear dynamic insertion campaigns served by MVPDs through set-top boxes on the two minutes of cable network airtime that they control (enabled in 52 million households). Meanwhile, smart TV manufacturers (Samsung) and system operators (Roku, Sorenson) are developing the capability to serve targeted commercials alongside or within linear TV feeds, with real-time monitoring. This will allow any television provider to offer addressable campaigns and tap into “programmatic” ad budgets, beyond the traditional two minutes of locally-inserted commercials on cable networks. x
ABOUT THE AUTHOR. Vincent Létang has been analyzing the global media and advertising market for 25 years (Vincent.firstname.lastname@example.org, @vletang_magna). ABOUT MAGNA. MAGNA is the division of IPG Mediabrands focusing on Investment, Innovation and Market Intelligence. MAGNA Intelligence publishes market research and forecasts on the US ad market and the global media industry, thanks to its New York-based team of analysts and its network of local experts in 70 countries. More than 30 media companies subscribe to MAGNA Intelligence’s reports, insights and data, in Europe and North America. To learn more about MAGNA reports: email@example.com.