Now is the winter of our discontent, made that much colder by the absence of the ad dollars that everyone in the TV world swore would come back in scatter.
They haven't, and people are worried. While it's not an easy time to get TV executives on the record, they have to shoot straight with investors on quarterly earnings calls. The high rollers in TV—including Fox's Chase Carey, NBCU's Steve Burke, Disney's Bob Iger and Viacom's Philippe Dauman—have spoken, and the future is frankly looking bleak for TV ads.
Cable TV ratings will continue to be bad. For a decade, probably.
It's something execs have been trying not to say for a long time, but there's no way around it anymore: Ratings are down and unlikely to return to their peak levels. "The fact of the matter is the next five or 10 years in basic entertainment cable, as it relates to ratings, are going to be much more difficult than the last five to 10 years," Burke bluntly told investors on Comcast's earnings call this month. "When you can get those episodes in other places, I think [cable networks] are going to be tougher businesses than they have been."
Josh Sapan, of AMC Networks, agreed. "[The] trend, if there is a trend ... is slightly down for cable channels of late." (Sapan contended, as did others, that his own properties were weathering the storm just fine.)
And money isn't returning to the market—not even for clients whose businesses are doing well. "The auto category ... has been a bit of a disappointment," Carey told investors. "Auto sales have been great, yet it seems to be a place where the auto advertisers are ... keeping more of the money in their pocket. Hopefully, some of it comes back into the market, maybe with fresh budgets for the holiday season, but the auto category, for all the strength of the auto market, has not been a strong category year-on-year."
Nielsen ratings don't measure huge swaths of viewers watching shows through approved channels.
And then when those viewers are measured, clients frequently kick the deliveries back to sellers as unsafe, given the high levels of fraud and incompetence in delivery. "[In some cases,] more than three-quarters of the digital impressions offered to advertisers [are] rejected either because the impressions are fraudulent, unsafe, not viewable, don’t meet brand requirements or are unknown," said Dauman. "We are in a transitional moment where the existing measurement services have not caught up to the marketplace."
Bob Iger agreed and said his company was scaling back on TV ads, too. A lot of the execs varied their pitch to investors; the company line for Iger was diversity. Disney was dispassionate, he said. "We are an advertiser, and a substantial component of our advertising buys, particularly for the studio and our theme parks, is digital."
But of course Iger also has a problem with the way the ratings situation seems to work, which he called "very frustrating."
"We know there is more consumption, but the measurement isn’t there to back it up," Iger said. The problem, he explained, is that the data available—Nielsen ratings—can't be combined with ratings of digital and mobile viewership, so there's no way to publish a cumulative number and get paid based on it. Advertisers aren't necessarily enthusiastic about having a cumulative number, by the way, as in, is an ad delivered on phone worth as much as an ad delivered on a TV screen?
The fact remains, however, that everyone on these calls said that they were looking at minimizing their exposure to Nielsen-rated ad deliveries in the future, the same way you'd cut a stock out of your portfolio if the company was failing. "It is not," Iger opined, "a particularly positive situation. I don’t know what it’s going to take, except probably significant investment to come up with numbers that really reflect where consumption is today."
Advertising might not be nearly as large a part of the equation in the future.
Carey was particularly blunt about this. "The ad-free platform has more value than an ad-supported platform, certainly at this point in time," he said. Networks get money from distributors, and Netflix and Amazon are just as much distributors as Comcast and DirecTV, and Carey observed that consumers want ad-free content. Netflix and Amazon pay handsomely for product now, and they're likely to pay even more for it later because Carey said Fox would be focused on getting as much as it could for those non-ad-supported licenses to offset the decline in advertising. "I don't think we're going to try and discipline the world to say that every platform has to be an ad-supported platform," he said.
Even CBS' Les Moonves listed among his initial bragging points in his company's earnings call the decline in share advertising represented of his company's profits. "The third quarter was the first time that advertising made up less than 50 percent of our overall revenue," he told investors. "And year to date, we have now recorded an even 50-50 split between advertising and nonadvertising revenue, which is a far cry from the 70-plus percent of advertising that we had a few years ago."