Non-Linear Sales a Growing Part of TV Revenue: Magna

While forecasting a decline in linear TV, media buyer Magna said that U.S. non-linear advertising sales by television companies will increase 22% to $2.6 billion in 2020.

Non-linear advertising--including network full-episode players and Hulu--will represent 6% of national TV ad revenue, Magna said, reflecting the continued demand for TV, even as the number of traditional ratings points dwindle.

“Linear television remains attractive for its reach and brand safety, and affordable by the tech sector,” the Magna report said.

That demand is pushing TV commercial prices on a cost-per-thousand viewers basis up more than 10% a year to more than $50 for adults 18-49 in prime time.

English-language broadcast network ad revenue is expected to be up 1% in 2020 thanks to a boost from the Olympics and presidential election. Without the Olympics and elections, spending would be down 4%, Magna said.

Cable networks are looking at a 0.5% drop in 2020 including the Olympics and election spending or 2% excluding those events.

Magna said that digital advertising sales growth slowed in the first quarter of 2019 to 16%. The agency expects digital ad spending to finish 2019 up 13% and grow just 10% in 2020.

Firms in the technology sector have been the most dynamic ad spenders because of intense competition between new internet giants and big old tech brands over smart home products, over-the-top video-on-demand services and cloud services, Magna said. The launch of 5G will re-ignite marketing in an otherwise mature wireless sector, the agency said.

Direct-to-consumer brands will increase traditional media spending by more than 40%, from a relatively low base, according to the report. “Those brands are particularly attractive to television vendors as they come to the TV market with little leverage and are willing to pay higher rates than CPG brands that have been on TV for fifty years and have the scale to negotiate sub-market cost inflation,” Magna said.

Overall, Magna forecasts that net advertising sales in the U.S. will be up 5.1% in 2019 excluding special events. For 2020, ad sales are expected to grow 5.8% to $233 billion, with the Summer Olympics and presidential election generated $6.2 billion in incremental revenue, up from the $5.4 billion in incremental revenue added by Olympics and elections in 2018.

Globally, Magna has raised its forecast, now calling for 5% growth to nearly $600 billion in 2019, from a December estimate of 4.7%. Either way, it's a 10th straight year of growth.

For 2020, the agency sees total growth of 5.4%.

“Global ad spend continues to grow as the economy remains strong in key markets but two factors are slowing down the growth rates in 2019: one is cyclical (the lack of major events in 2019, following a record year in 2018) while the other is structural: digital ad formats maturing (from % in 2018 to % this year) as they now account for more than half of total advertising sales,” said Vincent Letang, executive VP, global market intelligence at Magna. “However product innovation (smart homes, cloud services, OTT, 5G) and marketing innovation (direct-to-consumer brands) will continue to drive ad spend growth this year and next.

Worldwide traditional linear advertising sales--including broadcast TV and radio, newspaper and magazine ad pages and out of home--will decrease by 3% to $290 million in 2019 while digital ad sales will grow by 14%.

Linear TV ad revenue will decrease 2% to $175 billion in a non-Olympic year. Excluding the U.S., linear TV ad revenue will be up 1% in 2019.

Digital ad sales this year will represent more than half of global ad sales for the first time this year, reaching $304 billion, or 51% of the total.

The bulk of digital advertising growth will come from ad impressions and clicks on mobile devices (mostly smartphones). Mobile ad sales grew by 24% in 2019, to account for 68% of total digital advertising while desktop-based ad revenue will shrink 3%, due to declining usage and ad blocking.

Jon Lafayette

Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.