Is the ‘TV pie’ growing or not?

Opinion

The answer depends on whether the question is referring to viewing, inventory or investment.

In following an extraordinarily polite exchange between Lindsey Clay and Nick Manning recently, I found myself in a rather conflicted state.

The exchange centred on an article written by Manning, in which he said that “Netflix, Amazon Prime, Disney+ and FAST streamers are eating away at the TV pie”. Clay disagreed, making the point that these companies are “growing the TV pie, creating additional high-quality ad inventory”. Manning duly conceded, showing us all that it’s OK to be wrong.

Except he wasn’t.

But then, neither was Clay.

Many pies

How could these two industry titans be right? Well, at risk of exhausting the metaphor, I think they were talking about different pies.

Manning, I think, was talking about the investment pie, whereas Clay was referring to the inventory pie.

At face value, it would be fair to assume that more ad inventory leads to more investment. OOH is a good example of this — the mass digitisation of sites has led to growth in both inventory and investment. But this isn’t always the case.

If we turn our attention to a third pie — viewing — we can start to see where the relationship between inventory and investment starts to break down.

In the OOH example, media owners have — by and large — been able to increase the yield of each site via digitisation without needing to grow footfall.

In TV, where viewing is fragmenting, the equation isn’t as simple.

Linear TV’s pricing mechanic means any increase in yield (inflation) is offset by a decrease in volume (viewing). The story is different for VOD, in fairness, where the link between supply and demand is less direct and viewing is on the rise.

However, the contrast between linear and VOD reveals an uncomfortable reality for broadcasters. Viewing growth + inventory growth = investment growth. Without viewing growth, it is tough to grow the investment pie in real terms over a sustained period, regardless of how much inventory there is.

More mouths to feed

For a while now, we have known that TV set viewing has been stagnating, with subscription VOD (SVOD) viewing cannibalising linear TV in the main.

Now that these platforms are achieving scale with new ad propositions, it would be fair to assume that the opportunity to advertise to previously untapped viewing segments will lead to total TV revenue growth.

This, I fear, is an optimistic assumption. The more realistic outcome would be the cannibalisation of linear TV investment from SVOD suppliers.

I could be wrong, of course, but it feels like the extent to which the TV investment pie is set to grow depends not on the commercial success of SVOD platforms, but on the ability of UK broadcasters to hold on to their audiences.

Undercooked

There is an important counter-argument to looking at TV investment as a zero-sum game: it assumes that advertising investment is already being efficiently allocated across all other channels.

Clearly, this is a topic in constant debate, although Richard Kirk made a compelling case recently to suggest that TV (along with other AV channels) is being underinvested by advertisers.

Put another way: regardless of whether the viewing or inventory pies are growing, TV investment should be going up.

Of course, as Kirk is keen to stress, the reality is brand-dependent (it always is). But, crucially, when it comes to TV, there is such a rich bank of publicly available, low-cost data that there is no excuse for making unqualified investment decisions.

So we all have a responsibility to ensure that TV — or any media channel, for that matter — gets its fair share of the investment pie.

Ian Daly is AV investment lead at the7stars