tv advertising spending drops by 8% in Q1 2023

Advertisers are still spending billions on traditional advertising on traditional TV stations and cable networks but the amount is shrinking and is expected to keep dropping in the following years according to a study from eMarketer.

According to the report, which tracks ad spending on both Linear TV (traditional) and Connected TV (streaming) during the 12 months ended on March 2023, advertisers poured 8% less into the traditional segment for a total of $61.3 billion.

Meanwhile, the amount spent on adverts on Connected TV such as the spaces that are now being offered by Netflix (NFLX) and Disney+, along with other streaming platforms, grew by 21.2% during this period to land at $25 billion.

Even though Linear TV ad spending is more than twice the amount spent on Connected TV, as the ad-supported user base of streaming platforms continues to grow, the scale could be progressively tipped, especially if conversion rates on these digital channels are ultimately better.

Older People Still Enjoy Watching Linear TV and are Keeping It Alive

Despite the so-called cord-cutting trend, it seems that millions of people are still enjoying their Linear TV content as the same research indicates that American adults saw nearly 3 hours of traditional TV per day compared to almost 2 hours of content they watched on connected TV platforms. Older audiences account for a large percentage of the viewership of Linear TV.

By 2027, the amount spent on Linear TV ads is expected to drop to $56.8 billion – a 7.3% drop compared to the figure reported by eMarketer by the end of March 2023. In four years, researchers expect that CTV ad spending could account for 40% of the total compared to around 30% at the moment.

Hulu, a streaming platform owned by Disney (DIS) leads the scoreboard in terms of ad spending, attracting $3.6 billion from advertisers during this observed period. It is followed by YouTube and Roku, which brought $2.9 and $2.2 billion each respectively during the same period.

One interesting data point shared in the report is that a large percentage of YouTube’s viewing time is now occurring on TVs, not smartphones. This transition from a mobile platform to a TV channel is turning YouTube into an even bigger threat for TV stations and cable networks and advertisers may soon start to recognize that shift and pour even more money into it.

Ad-Supported Subscription Tiers on Streaming Platforms Attract Millions Already

Subscriber figures per streaming platform

In November last year, Netflix launched its ad-supported tier in multiple countries for $6.99 per month as part of its effort to crack down on password sharing. By March this year, over 1 million had reportedly signed up for this subscription tier.

Even though this number is quite small compared to the platform’s total subscriber base of more than 200 million accounts, it indicates that there is interest in the program, especially now that the Los Gatos-based company is enforcing its new account sharing rules.

In a similar fashion, Disney+ also launched an ad-supported account a month after Netflix. This tier is already available in the United States and Disney initially partnered with over 100 advertisers to display ads during the streaming experience. The cost of the ad-supported option is $7.99 per month.

The transition that LTV and CTV ad spending is experiencing at the moment may continue to progress in the following years. It resembles what happened to traditional marketing channels and online channels since the dawn of the internet.

In the beginning, advertisers struggled to see the opportunities and benefits of having an online presence. However, a couple of decades after, digital marketing advertising has surpassed traditional by a long shot.

It is now difficult to see a company that does not prioritize its digital presence over its advertising efforts on TV, radio, or newspapers. Can the same happen on the LTV vs. CTV front? Everything seems to be pointing in that direction but only time will tell.