TV Ad Revenue Will Rebound in 2021, but the Industry Is Never Going Back to Normal

The past year has been a bruising one for the television industry. Covid-19’s rapid descent on the globe turned off TV’s programming spigots, leading to a drought in advertising revenue. Consumers stuck at home continued to cord-cut or otherwise move over to streaming even faster than they had. And just as a sense of recovery seemed imminent, cases began to surge again: first in the Midwest, and now in almost every state in the U.S., depressing any hope of a quick, V-shaped recovery. But as we begin 2021, things are starting to look up—sort of. By mid-November, advertising levels across the top 25 TV networks had returned to 2019 levels for the first time since the pandemic began, according to the measurement firm Kantar. That's one promising sign that advertising spend is finally moving in the right direction for broadcasters. And TV executives at companies like Comcast, Disney and ViacomCBS, which saw steep second-quarter ad revenue drops between a quarter and a third, spent the last months expressing to investors their cautious optimism about a rebound. “We’re encouraged by what we’re seeing and, big picture, advertising is certainly moving in the right direction,” ViacomCBS CEO Bob Bakish told investors in November, after ad revenue fell only 6% in the third quarter compared to a 27% second-quarter drop. As AT&T CEO John Stankey put it in late October as the company's ad revenues stabilized: “I think we’re out of the woods at this point, from being dead cold in the middle of the pandemic, to one where we feel like we can get hours [of programming] produced and brought forward.” The Industry Recalibrates That optimism remains precarious, however. The notion of a TV ad sales recovery comes hand-in-hand with a a recalibration of industry expectations around what the advertising landscape will look like now that Covid-19 has upended so much about consumer habits and their markedly weaker economic realities. “Recovery is really about how we position ourselves in this new normal,” said Gregory Aston, global head of research, digital advertising intelligence at the intelligence firm Kantar. There are early signs that TV ad revenue will be more robust in the new year. National TV ad sales are expected to grow 5% in 2021, buoyed by investments around the rescheduled Tokyo Summer Olympics that will bring in an estimated $800 million, according to intelligence firm Magna Global. Because those projections for the TV ad sales landscape hinge on an economic recovery, as well as the assumption that tentpole programming events will continue as scheduled, it’s unsurprising that the industry is anxiously awaiting the roll-out of the incoming Biden administration’s pandemic response, to make early determinations how that will affect consumer and advertiser activity. “The prerequisite [to recovery] is obviously that Covid is under control in the first half of [next] year,” said Vincent Létang, evp, managing director, Magna Global Market Intelligence. “That doesn’t mean everybody is vaccinated, but enough people need to be vaccinated that the number of cases and hospitalizations go under the threshold that most restrictions to businesses and mobility can be removed in most of the country.” Where to Spot Signs of Recovery Vaccinations alone won’t provide the recovery for the TV business's ad sales. Experts are watching how travel, retail and auto sectors return to television advertising to understand broader trends about consumer confidence and about the health of national TV media spending. Collectively, those three sectors represent around a quarter of total advertising expenditure, according to Kantar. Rising ad dollars in those areas will act as a bellwether by spurring other forms of peripheral economic activity. “Given that these three industries have such a heavy impact on ad spending, where they go, the category ultimately goes, and there are ramifications into the broader spectrum of other categories,” said Aston. Consider the travel sector: If those advertisers are spending more, it’s probable that restaurants and local advertising generally will also tick up on TV to capitalize on consumers that are presumably in trip-planning mode. Consumer confidence in travel is a key barometer for other forms of behavior. “If a consumer is willing to travel overseas, they are clearly going to be willing to go back to the store,” Aston said. The 2021 Retail Shakeup Other more reliable TV marketers may look very different in the new year, shaking up their advertising plans. Retailers, many of whom made big ad buys ahead of the 2020 holiday season, may end up spending less on national TV in 2021, partially because there may simply be fewer of them in business by then. Other retailers, emboldened by ecommerce, may change their strategy to prioritize driving online sales over in-person visits, which will shake out in the media mixes. That spend, too, may also hinge on retail locations being allowed to operate without restriction—and will depend on consumer comfort with returning to those stores. It's important for marketing to consider that consumer confidence, while a clear indicator of where to shift spending, is not synonymous with actual consumer spending power. Pent-up demand is one thing, but the ability to put money behind one's desire and intent is another. High rates of unemployment and a bleak economic outlook may end up dampening certain advertiser spending until American families see a broader and more equitable economic recovery. That disconnect may be particularly pronounced in the auto sector, one of the largest and most reliable spenders on national and local TV advertising. So far, that category has demonstrated a K-shaped recovery, in which a portion of the population is recovering and is willing to spend discretionary income, while another segment remains economically constrained and depressed. That dynamic may mean traditional TV spending is less appealing to those marketers. If they grow budgets at all, it might be in digital rather than linear TV, where advertisers can target more precisely to households with discretionary income, Létang said. Advertisers' Needs Shift as Consumers' Habits Evolve As advertisers’ needs shift, consumer habits are evolving, and Covid-19 shutdowns poured jet-fuel on consumers’ adoption of streaming television and on-demand viewing. Media companies are scrambling to act, propping up their fledgling services with flashy new content while executing widespread organizational restructures to be better positioned for the new normal; on the advertiser side, digital video buyers plan to shifting their budgets from traditional linear TV to connected TV, by an average of about 21%, according to a December survey from the International Advertising Bureau. That stands to have a long-term effect on what the future of the television advertising industry looks like, long after Covid-19 is relegated to the history books. “Several of the 2020 changes will be permanent ones, meaning it was an inflection and we are now on a different trajectory,” Létang said. “The shift to towards digital media consumption was a long-time one, the shift toward e-commerce was a long-time one, but it has accelerated, and we are not going back to the previous trajectory.”