US broadcast network TV advertising will decline 7.4% in 2001, to $15.5 billion, with a further 3% decline in 2002, according to analysts at ABN Amro. The broker cites the ongoing economic downturn as the cause of the decline.
Over the long term it expects broadcast networks to see further audience erosion, as the average number of channels per home increases by 45% or more by 2006. Combined with flat TV usage, this means that growth will hinge on further CPM increases (the US equivalent of costs per thousand (CPT) in the UK). This may prove difficult, say analysts, because of the increase in media outlets (the internet, for example) and rising TV inventory from more video channels. As a result, ABN expects broadcast TV ad spend to continue to lose share to cable TV and to decrease as a percentage of total TV advertising.
Given that there is little sign of rising programming costs abating and with thinning profit margins, broadcast network economics are becoming increasingly untenable. This, says the report, may result in the loss of a key competitive advantage – the ability to deliver mass audiences through event programming.
Nevertheless, broadcast TV remains the only means by which advertisers can reach mass audiences and should still command premium pricing, says ABN.
