Video’s Advertising’s Acceleration Could Wipe Out TV’s Forecasted Growth


FTI ConsultingMost industry analysts have tended to forecast that the US TV industry will continue to grow over the next few years, but a new study by FTI Consulting, according to FTI Consulting has said that digital’s surging growth – particularly in online video – could significantly stunt TV’s growth. Luke Schaeffer, Senior Managing Director and Co-Leader of FTI Consulting’s Media & Entertainment team, said, “We are closely monitoring the possibility that digital’s penetration of the advertising market may be accelerating. There are a few initial indicators that the hastening of digital video advertising may be causing such acceleration. If that does indeed prove out, we estimate the digit video ad trend could eliminate much of the forecasted growth in television advertising over the next five years’.

Digital advertising in the United States is set to surpass broadcast television’s long-held dominance of media ad spending in 2015 and will become the largest ad class by next year. According to its annual study, U.S. Media Industry Forecast, the firm’s Media & Entertainment team believe core online advertising will climb from $37.5 billion in 2014 to $41.8 billion this year and $55.6 billion by 2018.

 

FTI also predict that the broadcast sector will see a 4.2 percent average growth rate over the next five years, while digital advertising is forecasted to grow at 10.3 percent. Broadcast ad revenues are expected to rise minimally in 2015 to $38.9 billion and to $45.5 billion by 2018. Direct mail is the third highest grossing sector, and is expected to remain flat at approximately $44.2 billion by 2018.

“While it is difficult to completely isolate one factor that is driving changes in ad spending from the historical trends, our model suggests that digital substitution is the primary driver contributing to changes in the television ad ecosystem today,” commented Philip Schuman, Senior Managing Director and Co-Leader of FTI Consulting’s Media & Entertainment team. “We believe that effective data-driven targeting, low CPMs and vast inventory, as well as a direct feedback loop that enables advertisers to calculate a return on digital advertising dollars spent, has enabled them to allocate less to get more.”

The Media & Entertainment team’s model – which looked at expected changes in variables such as consumer spending, corporate investment, employment, digital advertising growth and political advertising – projects overall advertising growth from all forms of media (including TV, digital, print, direct marketing and outdoor) will increase this year by 2.4 percent in comparison to a 3.0 percent increase in 2014.

Based on historical averages, FTI forecast suggests that the total US ad market would currently equal $280 billion – 1.6 percent of GDP – without the effect of digital. Instead, it remains at a record low of only $212 billion, representing 1.2 percent of GDP, with digital now accounting for $48.0 billion of the total. Consequently, ‘traditional advertising’ has lost nearly $120 billion in potential revenue.

“If digital follows a growth curve similar to that of other technologies, we would expect it to grow from 22 percent of the market today to 30 percent by 2020 and 35 percent by 2040,” said Luke Schaeffer, Senior Managing Director and Co-Leader of FTI Consulting’s Media & Entertainment team. “A critical question is if efficient market economics will bring the market back to equilibrium or if the Internet has created a permanent new paradigm.”


Subscribe to Weekly VAN Newsletter

 

Related Stories:

TV