Despite the bad press, TV should prove resilient in 2024
Opinion
SVOD has reached saturation point, presenting opportunity for linear TV as it continues to adapt and innovate.
TV had its fair share of bad press in 2023. Lowlights included a rather tepid Ofcom Media Nations report, a since-revoked article from Grace Kite in Marketing Week about the rising cost of TV and finally ending the year with The Guardian reporting a doom-and-gloom story about the slump in Christmas TV advertising.
This isn’t TV’s first round of bad press, nor will it be the last. TV has traversed a veritable onslaught of impending predictions of death and decline, yet it remains steadfast in the corner of 95% of British living rooms. Granted, the way we have watched has changed, but it has been changing since the dawn of television.
However, there are plenty of reasons to be cheerful about TV in 2024 and beyond. To butcher a quote from Mark Twain, reports of TV’s death are an exaggeration. There is decline, for sure, but I think it’s worth unpacking the numbers as some of the bad press often lacks a little colour and context.
TV continues to power and drive change. Just 10 days after ITV aired Mr Bates vs The Post Office, Rishi Sunak exonerated 736 wrongfully convicted postmasters. The TV drama, exposing a major injustice, prompted swift action, achieving in a week what postmasters had campaigned for over 25 years.
Is it as bad as it was made out?
First, looking at TV revenues, it’s no secret that these have been declining and with good reason; we’ve seen increased fragmentation in the market as viewers are spoilt for choice.
However, the decline isn’t as bad as much of the media makes out. TV revenues in 2023 are only down 4% versus 2015 — up on the expected trend if we extrapolate what was predicted to happen before the marketing world was turned on its head with a global pandemic.
As can be seen in the chart above, TV revenues saw huge a decline from the norm in 2020 before rebounding sharply in 2021. This was all pandemic-induced behaviour, with many brands cutting spend given the commonly held misconception that advertising throughout this period was wasted money.
Instead, we saw consumer spend artificially dammed up as quarantine procedures and furlough prevented people from going out and spending money. Savvy advertisers realised this dam was ready to burst and capitalised when it did. The relative clutter-free advertising environment gifted a unique opportunity to drive disproportionate share of voice and that in turn grew market share.
Brands such as Peloton, Cinch and Cazoo doubled down on TV investment and reaped the rewards — so much so that the rest of the market sat up and took notice. This resulted in the revenue boom of 2021 as advertisers felt the negative of a lack of brand investment. At Medialab, we actually saw a 250%-plus increase in equivalent impacts when comparing the pre- and post-pandemic period.
Outperformance
The 2021 revenue figure exceeds that of 2015 by almost 8% and is way above the expected trend had the pandemic not happened. This was TV’s renaissance period, but also the yardstick that it is compared to today. Not only were revenues soaring, but lockdown procedures also resulted in impact increases and this higher artificial base, borne out of mandated lockdown scenarios, bucked the historical trend.
2024 looks to be another interesting year. As outlined in Medialab’s most recent Navigating the Big Squeeze report, alongside YouGov, the cost-of-living crisis looks set to continue. However, inflation coming into the year has been at its lowest since September 2021. There is mounting pressure on the Bank of England to reduce interest rates quickly — and, if they did, that would help bring down the cost of borrowing and could result in more advertising spend.
Current predictions have the market down 7%. However, if we refer to the graph above again, revenues would have to decline by 10% to return to the pre-pandemic trend. So, despite these factors, TV is still outperforming on revenue relative to the pre-pandemic prediction.
It would also be remiss to not mention that we have a strong sporting year with the men’s Euros in June and July, followed by the Olympics — while not available to buy commercially, these do have a halo effect as commercial partners increase spend around the competition.
There is also the looming election and, while purdah temporarily halts government spend, I don’t think it is too cynical to say that Sunak will likely increase spend while he still has the ability to in a bid to get voters back on side.
Have we reached SVOD saturation?
With little else to do, lockdown increased our TV viewing and likely accelerated the adoption of subscription VOD (SVOD) services. This SVOD behaviour continued post-lockdown as new content and services were released and discovered. Our traditional TV consumption returned to pre-pandemic behaviour, but with more choice and production schedules halted by lockdown restrictions, viewing experienced sharper declines.
This decline continued throughout 2021 and 2022. However, we now seem to have arrived at SVOD saturation point, with subscriptions stalling for the last six quarters, according to the Barb Establishment Survey.
While some of the newer players such as Disney+, Apple TV+ and Paramount+ have seen quarter-on-quarter growth, the cost-of-living crisis has bitten hard and consumers are struggling to justify multiple subscription services. Clampdowns on password-sharing have not helped and, despite the likes of Netflix offering a cheaper, commercially supported product, uptake has been slow.
Although it has been a tumultuous few years for traditional TV, now that the ceiling of subscription services seems to have been hit, linear viewing is beginning to level off. 2023 is roughly on a par with 2022 for most audiences, so the 2.6% decline in viewing figures pales in comparison to the declines we saw in the previous two years.
Challenges ahead for SVOD
2024 promises to be a challenging year for SVOD services — something that should hopefully be to the benefit of linear viewing. With so much content on Disney+, Netflix and Amazon coming from the US, the Hollywood writers and actors strikes will severely hamper the content offering on these services.
Instead, they will have to rely on legacy, dubbed foreign-language and domestic content. While this will attract a certain audience, it’s a dramatic shift in content strategy and could result in consumers voting with their feet and moving away from these platforms.
Audiences may also get frustrated by constant price hikes and ad-supported products; since February, Amazon Prime Video has been showing ads to users who haven’t opted out by paying an additional £2.99 a month.
This is on top of Netflix and Disney’s existing commercial offerings, albeit they operate an opt-in rather than opt-out model, but I wouldn’t be surprised to see this stance change if subscriber numbers continue to dwindle.
This presents a huge opportunity for linear TV to attract audiences back. Last year saw huge growth in broadcaster BVOD platforms, with ITVX up a whopping 60%-plus for certain audiences. Broadcasters need to continue that success and try to spread that out to live viewing too.
This will hopefully be aided by technological innovations, such as Freely. Set to launch in 2024, Freely offers a live linear TV experience via internet protocol, allowing viewers access to live TV in locations that may not have had ready access to an aerial or satellite. For younger, digital natives, this may be a better way to connect to linear content and thus increase impacts or at least serve to mitigate the decline year on year.
A more nuanced story
In the face of a turbulent media landscape and a barrage of negative predictions, TV has proven its resilience in 2023 and this is expected to continue into 2024. Despite the decline in revenues, closer examination reveals a more nuanced story.
The shifts in viewer behaviour, accelerated by lockdowns, led to a surge in SVOD services. However, this growth has reached saturation point. This year holds promise for linear TV, as SVOD platforms face challenges such as the Hollywood strikes, audience frustration with price hikes and the introduction of ads on some services.
As the industry navigates these challenges, technological innovations like Freely offer a ray of hope.
The story of TV in 2024 is going to be one of adaptation, innovation and the continued quest for relevance in a rapidly evolving media landscape.
Jon Manning is director of advanced TV at Medialab