OMG Chief Investment Officer Kristiaan Kroon signalled 10 per cent of linear TV’s $3.3bn advertising take this year will head to alternative video formats and other media channels including radio, OOH and cinema as audiences revert with gusto to their pre-Covid patterns and reduce their time on what still remains the most effective, high reach medium for advertisers.

Some of Kroon’s media buying rivals were less bearish but did not rule out the possibility of a $300m decline as Nine CEO Mike Sneesby officially confirmed the network had paid $305m to lift the next eight years of Olympics coverage from Seven. 

On a media call last night, Sneesby said advertising and sponsorships would deliver the bulk of Nine’s revenue strategy for its record Olympics outlay. But he left open the possibility of subscription packages on Stan and new monetisation options still to be formulated. He said Nine’s diverse asset portfolio would offset the risk of linear TV’s audience erosion with the distribution of Olympics coverage spread across free-to-air, free and subscription video streaming services, publishing and broadcast and digital radio.

Nine has just on 18 months before the Paris Olympics in August 2024. 

“Clearly digital distribution is going to increase. I'm not going to make a call on what the mix is going to look like, but look at the results of Married at First Sight this week and the live streaming numbers combined with the seven day numbers on Nine. The numbers that are streaming on that show are as big as other networks on its own. So quite clearly we are seeing a change in consumer behaviour that doesn't surprise any of us," said Sneesby.

"By the time we get to the Paris games, there will be more people streaming than ever before. As I've said previously, Nine is in a really unique position to be able to distribute content like this, live content right across its platforms. If you look at the details of the announcement, you'll see it is a broad set of rights which will give us the ability to distribute not just on free-to-air television, not just on Nine Now but span our audio network in broadcast and streaming and even our digital publishing platform."

But, he admitted, "there's plenty of work ahead of us" to put deals together before Paris rolls around.

When asked by Mi3 if the record price Nine paid for the Olympics rights would be see big hikes in sponsor and advertising rates to recover its costs, Sneesby suggested Nine had more options than its predecessor, whose CEO James Warburton in December walked away from bidding, telling staff the economics didn't stack up after Nine's $300m offer.

“What you're sort of missing there is you're just looking through the singular lens of how it operates today. What I'm saying is distribution will broaden and it won't just be the traditional means. It's not a case of one network had them and charged this amount for sponsorship, we're going to have them and therefore we have to charge a larger amount," said Sneesby. "We've got more ways to monetise, more ways to distribute and more ways to deliver content to Australians. And that does give us competitive advantage in generating revenue from a partnership like this.”

Hedge hunter

Nine’s hedging strategy in acquiring and building audiences and assets outside of its free-to-air cash cow will be critical for both its Olympics coverage and the viability of its day-to-day business.

All broadcasters have made much of their digital video and streaming assets offsetting the decline of linear TV audiences but there remains mixed views on the how much of that gap is a direct swap out.

Some media buyers say the take-up of younger segments into live streaming and BVOD services, particularly, is not replacing linear declines and that broadcasters have not developed content that compels the younger set to return regularly.

The likelihood is that free-to-air will become a stomping ground mainly for older demographics, which still represent the bulk of discretionary spending. Others say free-to-air’s reach of younger audiences is holding up but frequency is down – which is why advertisers have to buy more TV spots to hit their targets.

Switching channels

Analysis of last year’s linear TV audience slump by Pearman Media’s Strategy and Research Director Steve Allen suggests broadcasters have offset 10-12 per cent of the overall 20 per cent linear decline last year with their digital video services.

“About 8-10 per cent is evaporating and going somewhere else,” Allen said. “We know a lot of that is SVOD. 2022 saw the biggest decline in TV history. The real issue for advertisers is can they buy the same [audience] reach cheaper elsewhere. TV reach hasn’t declined, it’s just they’re not there as often for a longer period of time.”

Still, Allen expects the rate of decline for linear TV audiences to slow this year by about half, citing Kantar’s study showing 1.3 million households cut a subscription streaming service last year, likely to benefit broadcaster and free-to-air viewing.

All relative

OMG’s Chief Investment Officer, Kristiaan Kroon is far less upbeat on audience and revenue implications for broadcast TV. He has $2.5bn in client advertiser budgets to allocate this year – the biggest single pot in the market.

“Our forecasts for the total ad market is flat for this year if we don’t go into a recession. But linear TV will be around minus 10 per cent,” he told Mi3. “That is around $300m. That money will follow audiences – other digital video alternatives like BVOD, Youtube but it’s also going to OOH, radio/audio and cinema. That’s not a bad outcome for TV. We think audiences will drop more than 10 per cent. All other channels will potentially grow off the back of that, because it’s a a very big decline. Let’s not forget the January to April ad market last year in total grew by over by nine per cent. It’s an extraordinary period we are about to compare against.”

Asked about Nine’s record Olympic rights fee and the tolerance for increased sponsorship prices to offset costs, Kroon said: “Have they paid more? Yes. Will they be able to deliver more audience engagement and effectiveness? If they can, we’re always up for a conversation around price and quality. If the conversation is 'will we pay more for the same?', then that’s a difficult conversation for us to have at any point. Certainly looking at the evolution of the Olympics under Seven, it become a much bigger, broader deeper offering.”

Halo effect

Mediabrands CEO Mark Coad said Nine’s Olympics deal will have factored in the “halo effect” on the broader business. “Looked at in isolation, nearly every major sporting deal in revenues versus costs wouldn’t  stack up. This is about broader halo effects on new audiences, new advertisers, new users. Nine’s got more touchpoints and more opportunities to recover their investment.”

It's also an opportunity to refresh first party data via audience log-ins, a strategy Seven harnessed to gain ground in recent years, claiming it also helped tap rival's sports audiences.

On OMG’s forecast for a 10 per cent, $300m exit of broadcast TV ad dollars this year, Coad said: “Numbers like that don’t surprise me given the structural shifts underway from broadcast to digital channels.”

GroupM Chief Investment Officer, Seb Rennie, said his group was forecasting less than half of OMG’s linear TV ad market decline – about four per cent. But he left himself some wiggle room.

“$300m depends on whether you’re bearish or bullish on the market. Our forecast were just before Christmas," said Rennie. "Things are changing pretty quickly.”