TV advertising revenue plummeted as a result of the coronavirus pandemic, prompting broadcasters to slash content budgets and review spending. Tim Dams examines the extent of the decline in ad spend and assesses the likely rate of recovery.
Nine months into the Covid-19 pandemic, GroupM – whose global media buying agencies include Mindshare, MediaCom and Wavemaker – predicts an ad spend decline of 4.4% for the UK for 2020, which is much improved on its prior expectation of a 12.5% decline that it forecasted in June.
GroupM says the advertising industry is experiencing a K-shaped recovery – the pandemic has seen rapid acceleration for e-commerce and advanced digital services and cratered industries like restaurants, bars, travel, entertainment and traditional retail.
In the US, it estimates that pure-play digital advertising will grow by 5% during 2020 on an underlying (ex-political advertising) basis, following on 2019’s 17% rate of growth. During 2021, the firm estimates that digital advertising will account for 55% of all advertising that it tracks.
Political advertising during the US presidential election has proved to be an important source of growth for digital media during 2020. Roughly 4% in total digital advertising was for political candidates and issues advertising, representing around 3% of the year’s gains.
Television advertising has also fared better than expected. In the UK, GroupM estimates it will fall by 10%, the worst rate of decline since 2009, but better than anticipated earlier this year. Its 2021 forecast now anticipates a 10% gain and a return to 2019 levels in 2022.
“Although streaming services receive much of the industry’s attention, traditional ad-supported television continues to do the bulk of the work supporting marketers’ brand-building efforts,” says GroupM.
The agency’s findings echo reports from the TV industry. At the height of the pandemic, the UK’s Channel 4 saw its revenue fall by half, and cut its programme budget by £150m. Chief executive Alex Mahon recently said the picture has improved and advertisers have returned, and that its content spend will go up “massively” next year to help it compete with streamers such as Netflix.
GroupM expects a strong rebound of 160% in 2021 as film studios seek to monetise their backlogs with a surge of highly anticipated launches.
“While this rebound may seem optimistic, we note that it only brings cinema back to 52% of pre-pandemic advertising spend.”
GroupM notes that studios are likely to release some upcoming titles on their direct-to-consumer platforms. “Even once the virus has receded, it seems unlikely studios will release as many titles in theatres as they did in pre-pandemic years, meaning admissions are likely to remain below 2019 levels for some time.
Print media will fall by 23% this year in the UK. In the US, the figure is 20% for magazine publishers and a 30% decline for newspaper publishers. “It is our view that neither the magazine nor newspaper sectors will ever exceed $10 billion in ad revenue in their current forms, even including existing digital properties.”
Looking ahead, GroupM predicts robust growth for 2021 as vaccines allow normal life to return in the second half of the year. In the US, the ad market will rise 11.8% on an ex-political basis, or 6% including it. “For subsequent years, we anticipate slightly higher growth than we previously forecast—now 5% in 2022 followed by 4% in 2023 and 2024—to reflect what we think will be an accelerated pace of investment in digital media by marketers of all sizes.”
In the UK, Brexit uncertainty still weighs on the British economy.
“At a minimum, our forecasts anticipate some degree of disruption to the economy in the early part of 2021 as adjustments are made; however, we think Brexit’s impact on the advertising market will be limited to a shift in spending away from the first quarter rather than meaningful full-year cuts.
More generally, we continue to assume that “normal” activity will return by the second half of the year, which pre-supposes that Brexit will not cause ongoing problems and that an effective vaccine will be widely distributed across the population.”