Advertisers Are Fleeing Television: Will You Pay More?


In a classic case of ad dollars following eyeballs, it seems Madison Avenue is slowly moving away from traditional television advertising, presumably to allocate more ad spend to digital outlets, especially the growing mobile advertising segment.

After years of being able to count on strong and stable audience sizes from television, television audiences are now shrinking as more consumers no longer see the value in large, expensive pay-TV packages. For the recently completed third calendar quarter, Bloomberg-compiled analyst estimates predict that the pay-television industry will lose 280,000 to 360,000subscribers.

This news was actually framed as a positive, considering the industry lost a massive 600,000 subscribers in the second quarter. However, when compared with last year’s third-quarter losses of 189,000, according to SNL Kagan, the estimated figure is nearly 70% higher at the midpoint. And advertisers are starting to notice.

SMI points toward falling TV ad spend

According to ad-spend insight firm Standard Media Index, by way of Business Insider, total TV ad spend has dropped by 4% compared with the previous broadcast year. However, all television outlets are not the same: Local operators grew 3%, and the heavily watched cable TV subtype dropped only 1%. However, major broadcast networks such as CBS(NYSE: CBS) ABC, and NBC are experiencing a year-on-year ad-based drop of 7%.

For CBS, a company that was dependent on advertising for nearly 50% of its total revenue haul during the first half of 2015, this is apparent in its financial results. On a year-on-year basis, the first half of 2015 has produced 3.7% less ad-based revenue over last year’s corresponding period.

During the second-half results, the company agreed with SMI that more of its ad-spend has transitioned to scatter-based marketing rather than upfront in both the broadcast and cable-TV markets. Long story short, upfront tends to be more expensive for advertisers but guarantees ad space — scatter, on the other hand, is cheaper but gives no guarantees as to availability, as it is usually sold closer to the ad’s airing. A shift to scatter-based marketing insinuates advertisers are less concerned with television marketing.

Better news for Disney’s ESPN

On the other hand, the news isn’t as bad for cable channels including The Walt Disney Company‘s (NYSE: DIS) ESPN. After renegotiating deals with the NBA and the NFL for huge price increases, the company is looking to cut as many as 350 jobs to partially compensate for the increased content costs.

And while Disney is a far-flung conglomerate, with many — myself excluded — looking for its movie studio to lead the path forward, the company is still led by its media-networks business. And while the company also owns other TV stations, including broadcaster ABC, ESPN is still the most-important channel for its most-important media-networks division.

There are two ways ESPN monetizes its cable network: subscriber fees and ad-based revenue. While SNL Kagan’s estimate of ESPN’s per-sub monthly cost, $6.55, has been widely reported in the media, ESPN would really like to grow advertising as well. And while a 1% decrease for cable-based ad-spend isn’t encouraging, it certainly isn’t the huge drop of 7% broadcasters are now facing.

In the end, however, this is another report that points toward a slow unraveling of the television business model. If ad dollars dry up, it’s possible that networks attempt to recoup the lost revenue in the form of higher subscriber costs (read: cable bills). Subscribers should watch costs carefully.

Written by Jamal Carnet of The Motley Fool

(Source: The Motley Fool)

Disney’s ESPN Said Planning to Eliminate as Many as 350 Jobs


(Bloomberg) — Walt Disney Co.’s ESPN sports network plans to eliminate as many as 350 positions, according to people with knowledge of the matter.

The cuts will be announced to employees as early as Wednesday, said the people, who asked not to be identified discussing an internal matter.

The action follows Disney’s announcement in August that earnings at its cable networks wouldn’t meet company forecasts as a result of subscriber losses in pay television and currency translation. That triggered a selloff in the shares of several media companies.

An ESPN spokesman didn’t immediately respond to a request for comment on Tuesday.

“ESPN has historically embraced evolving technology to smartly navigate our business,” the company said in a statement last month when plans for job cuts were reported by “Any organizational changes will be announced directly to our employees if and when appropriate.”

Written by Scott Soshnick and Christopher Palmeri of Bloomberg 

(Source: Bloomberg