Analyst Says Online Video Isn't Killing TV Advertising

The debate over the impact of online video on TV advertising continues, with Pivotal Research analyst Brian Wieser's report insisting that TV is not dying.

Wieser says that while ad spending on online video is growing rapidly, national advertisers still need the reach and scale of traditional.

In a new report, entitled "TV's Not Dying (And Neither Is Homer Simpson)," Wieser recalls the episodes of the Fox series in which Homer eats a poisonous fish and quickly goes through the stages of grief, arriving at acceptance in no time. Weiser says that investors have gone straight to fear that online video will take a big bite out of TV ad growth, "but nothing we have seen suggests it is happening at this point in time, at least based on the facts at hand and our interpretation of what they mean."

Wieser accepts that the national TV upfront market for 2014-15 was weak but chalks that up mostly to the normal ebb and flow between the upfront market and scatter. He notes that total national TV advertising was $42 billion last year and total spending online video was about $3 billion. Some of that online video spending came from marketers that are not national TV advertising and some spending from large brands probably came from digital dollars previously spent on banner ads or rich media, he says. That leaves about $1 billion that advertisers spent on online video that in the past would have been spent on traditional TV.

In the worst case scenario imagined by investors, Weiser says online spending would jump by $2 billion this year, or 10% of TV.

"Such spending levels seem unlikely—or potentially wasteful—if we consider that total online video content consumption equates to maybe 5% of total TV consumption and half of the online video consumption figure is accounted for by user-generated content that most advertisers might stay away from," he says.

Wieser also notes that TV ratings are declining but they don't reflect total TV viewing. He says that Nielsen's cross platform data shows that viewing hours per person is up.

"Regardless of the ups and downs of viewing, what's more important is that television's scale continues to dwarf all other media. Advertisers make decisions based on relative-best alternatives available to achieve goals, and television would have a lot of decline to do (or other media would have much more gaining to do) before television's status changes," he says.

"TV will co-exist well with online video for the most part . . . and will continue to do so for a prolonged period of time, especially as greater numbers of connected devices are used to view a greater share of video-based content among a greater share of the population. However, because the pace of this change is relatively slow and because conventional television's absolute size and ubiquity remains vast, the conventional form will remain a remarkably durable medium, much like many of the franchises it has spawned, such as the aforementioned Simpsons," Wieser concludes.