Structural stress

Nine chief Mike Sneesby last month told analysts that TV’s declining revenues – back circa 10 per cent last year – were “cyclical”, stating he expects Nine to post ad market share growth this year versus last.

Outgoing Seven boss James Warburton likewise said the total TV industry was “set to regain revenue share from other mediums, and Seven’s share within that”. He cited total TV currency VOZ as one of the key drivers for the TV market to “stabilise and recover” and backed Seven to take a “much greater upside than the last downturn recovery cycle”.

Bosses at two of Australia’s big five media agency holding groups are less bullish on the prospects of a reversal of current investment trends for TV.

Dentsu Media CEO Danny Bass said while the soft ad market may be cyclical, the question is whether the money will return to the same channels in the same quantum once the bear cycle ends. His view in a word? “No”.

GroupM CEO Aimee Buchanan suggested the TV ad market, back circa 10 per cent last year, “will be roughly about the same this year.” Other media agency execs have predicted another 10 per cent decline – circa $300m – for free to air TV in 2024. Buchanan said there were "ebbs and flows" to the total pie, with broadcasters' BVOD channels able to pick up SME advertisers that hadn't previously been able to tap into broadcast. But she also pointed to incoming ad plays on Amazon Prime, with Netflix, Kayo and Binge taking share of ad dollars. (Paramount+ also aims to be in the market with an ad tier “this half” according to sales chief Rod Prosser.)

The global streamers have realised that as subscription rates max out, their future growth is directly tied to advertising. Amazon, which posted $153m in Australian ad revenues in 2023, up 51 per cent, is touting highly competitive rates locally – increasing price pressure – and promising Prime audiences of circa 5 million. Ad buyers have forecast streamers will take $75m-$100m out of the free-to-air market in 2024, likely accelerating into 2025.

The rise of retailer media presents another competitive threat, with Morgan Stanley forecasting retailers such as Woolworths, Coles and Amazon will take $100m out of total TV revenues this year and $452m by 2027, though the likes of Cartology suggest those numbers fail to account for potential upside from 'off network' partnerships whereby retailers target BVOD audiences for brands using shopper data.

Speaking alongside Buchanan and Bass at the Future of TV Advertising conference, former Initiative global CEO and ex-Huge chief Mat Baxter was typically forthright. Brands, per Baxter “are completely reshaping the way they deploy investment” with less money going into traditional advertising and more into their owned channels, tech stacks and technology partnerships with global platforms. “This isn't a cyclical thing,” per Baxter. “It's a seismic recalibration of how brands think about their ecosystem.”

All three agreed that data-rich scaled platforms and martech providers will continue to take a greater share of marketing budgets, with Bass pointing to Salesforce’s Sydney conference the week prior – NAB sent 100 execs to the event, Woolworths circa 200 – as an indicator of brands’ priorities. His straw poll of the TV event suggested there were nowhere near that number of marketers in the room.

"What worries me is, have we missed the moment in time all in time? [We] were on this stage 2019 and if you look at the agenda for that day, we pretty much talked about same things. So I think it's really important that we as an industry in our own ecosystem, look at who the key constituents are – are we talking to them? Because otherwise the show will leave town and it will be two seagulls fighting over a chip."

Consolidation incoming

Given the increasing number of media owners fighting for a smaller share of the spoils, Buchanan said consolidation “is probably inevitable” with New Zealand TV's potentially existential challenges a “bellwether” per Dentsu’s Bass.

TV bosses likewise anticipate further consolidation – Seven has taken a position in ARN and it would be no surprise if Nine were to re-run the rule over an out-of-home acquisition, with QMS the most obvious candidate, though bosses of both firms have dismissed deal rumours two years ago as speculation. Either way, private equity owners Quadrant would now be able to command a higher fee given the bedding-in of the City of Sydney network and double-digit revenue growth across the sector, coming partially at TV’s expense.

Beyond consolidation, Bass pointed to the music industry as template for the TV companies to lift and adapt. Ravaged by Napster and then iTunes and Spotify, “the industry was completely on its knees”. But then it accepted the business model had changed and was likely never going to be as profitable, and “transformed its business operation”, though it took "a lot of years of really hard work to get to where they are today".

TV businesses must now face similar “acceptance … realising that the market has changed, it's gone, it is never going back to the way it was and that clients are never going to think about it the way they used to”, said Bass. But the networks are largely "still really profitable businesses producing great content," said Bass.

Even amid declines, "If you walk across most agency floors right now, the vast majority of people are still buying broadcast,” said Bass.

Economic indicators suggest a better second half of the year for the broader ad market as anticipated rate and tax cuts kick in, with VOZ trading anticipated by August potentially giving TV networks a bump if there are no further hold-ups.

But by that time Amazon Prime ads will be live locally and the other global platforms will almost certainly have increased their share of ad budgets. The only way for TV to counter them, per Baxter, “is to pool your effort, resources and strategy together.”

Likewise, he urged the TV industry to collectively turn its brand building firepower inwards – and not become panicked into trying to become too many different things. Premium, prestige, brand safety and privacy compliance, he said, remain potent differentiators.

"If I asked all people in this room some core questions about 'brand television', what are its core values, propositions and promises to clients ... that distinguishes TV from other channels in ecosystem, from other publishers, would those answers be consistent and uniform? The answers would to be all over the fucking planet," said Baxter.

"If you stand for nothing – or stand for very many things – it's very difficult to build a coherent brand story and differentiate yourself from super brands like YouTube and Facebook. You're going up against the strongest brands, not just in your sector, but some of the strongest brands in the world – and you don't have a brand strategy. You do not have a brand strategy, you do not have a brand promise, you do not have clear values that you articulate to clients. One of the biggest and most powerful things that television has always had, it's lost."

TV needs to evolve, per Baxter, but "not a full 180 flip ... it needs to stay true to its heritage and its core brand."