Fed-up advertisers stop paying more for smaller TV audiences

TV ratings have dropped 33% in the last four years while TV ad prices are up 20% during that period

In the coming weeks, TV networks will host glitzy events in New York to convince advertisers to spend more money on the latest dramas and reality shows. Many ad buyers, however, say they’re tired of paying ever-higher prices to reach ever-fewer viewers.

Thanks to competition from so many new forms of entertainment — Netflix, Facebook, Snapchat — audiences for traditional TV networks, from ESPN to MTV, are declining. In the current TV season, the four major broadcasters have lost 8 per cent of their audience. Because of the slumping ratings, advertisers who want to reach a certain amount of eyeballs can’t get what they need from television anymore.

To make up for the shrinking audiences and keep ad sales high, TV networks have kept raising their rates, believing ad buyers will just have to spend more to reach the people they need. 

TV ratings have dropped 33 per cent in the last four years while TV ad prices are up 20 per cent during that period, according to Magna, the ad-buying agency owned by Interpublic Group of Cos.

But now, marketers are losing patience with the networks, and ad sales in the $70 billion US TV market are slumping.

“Advertisers’ businesses aren’t growing 10 per cent, so when you charge 10 per cent increases you’re going to scare people away from TV,” said Dave Campanelli, director of national broadcast at Horizon Media, an ad buyer.

Some ad buyers have been shifting more of their TV budgets to the internet, seeking to encourage the growth of digital competitors like Hulu and YouTube. Last year, Magna announced it would move $250 million of its clients’ TV budgets to YouTube.

Though major media companies Walt Disney and 21st Century Fox won’t report quarterly results until next week, cable networks look likely to post their first decline in advertising since 2010, according to Bloomberg Intelligence.

Bloomberg