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News Analysis 30 Sep 2020 - 4 min read

The comeback kids: TV surges back to growth for December quarter as digital leads recovery, supply tightens

By Josh McDonnell and Paul McIntyre

Nicole Bence, Network Digital Sales Director at ‎Seven Network: “We have never seen fraud levels higher than 0.1% for premium, professionally produced video content on Connected TV (CTV)."

TV networks are in surge mode as advertiser demand for the December quarter is triggering  supply challenges and predictions for year-on-year growth. BVOD is up 47% in August over the same time last year which could see it touch $300m next year, up from $200m. Online display is also in growth. But is TV headed for a sustained recovery or is the shift of “big ticket” TV sport events into the final quarter of 2020 behind the spike?

What you need to know:
  • TV networks are claiming the fourth quarter of 2020 will see a renewed interest in TV advertising, with expectations of year-on-year growth for the final months of the year.
  • Media agencies agree there has been a sharp increase in demand in the fourth quarter.
  • Seven Chief Revenue Officer Kurt Burnette told Mi3 brands are now scrambling for spots after planning on making shorter-term deals earlier in the year.
  • The spike in demand is good news for the networks after a 22.7% revenue slump in July.
  • Industry insiders claim August year-on-year declines were lower than previous months with Seven, Nine and Ten registering a 6.3% slide.
  • Media agency heads of investment say the growth in the TV market is being driven by many brands “switching back on” ahead of Christmas.
  • Carat’s Chief Investment Officer Craig Cooper told Mi3 the growth is also being fuelled by key sporting events such as the State of Origin and the AFL and NRL grand finals moving to moving to late October/November.
  • Nine's Chief Sales Officer Michael Stephenson says the TV and digital ad market has recovered "quicker than we anticipated", led by home delivery services, auto, financial services and big retail
  • BVOD viewing lifted 46% year-on-year since lockdowns began in March, and broadcast TV viewing by 4% year-on-year, according to OzTAM.


A better view of TV

Despite a difficult year for TV -  ThinkTV numbers show a 13.7% drop in revenue for the 12 months to June 30 - the outlook for the final quarter of 2020 is getting hot.

Executives from the Nine, Seven and Ten networks are all reporting an uplift in the demand for TV and broadcast video on demand (BVOD) in the lead-up to Christmas.

The increase in demand is good news for the networks, given the 22.7% revenue drop they saw in July, according to SMI.

Industry insiders claim August was a better month, with Seven, Nine and Ten registering a 6.3% slide.

TV sales bosses are confident the jump in revenue could see the capital city TV ad market record a year-on-year increase compared to the final quarter of 2019.

This is off the back of strong audience numbers including BVOD viewing growing 46% year-on-year since lockdowns began in March, and broadcast TV viewing up by 4% year-on-year, according to OzTAM data.

“A few months ago, you could book a spot in a desirable TV slot a week out with no concern,” MediaCom Chief Investment Officer Claire Butterworth says.

“Now, however, there is certainly more pressure and buyers are seeing planning times return to normal. At the same time, prime inventory is becoming more difficult to book.”

Nine's Chief Sales Officer Michael Stephenson says December for linear TV will be in growth - he wouldn't put a figure on it - with advertisers pushing big brand campaigns and looking to drive e-commerce-led "omnichannel" strategies.

"The TV market has certainly recovered quicker than we had anticipated," he told Mi3. "And it's really interesting. There are some emerging growth categories - home delivery, obviously, is one; we're seeing the return of financial services, auto and the big retail sector is doing well.

"But what you're going to see in the next few months is the return of some really big brand campaigns and really interesting big creative ideas. So I think people are certainly feeling more positive than they have done for quite some time and that's flowing through into ad revenue." 

Seven Chief Revenue Officer Kurt Burnette says the current situation proves the point he made in August about long-term investment in TV.

In this Mi3 story, media agency leaders were supporting short-term deals with the major TV networks and looking to cut annual commitments.

Burnette says the current inventory shortage, particularly on linear TV and with big sponsorship deals, proves agencies needed to invest with the networks long-term.

“We’re looking at a very buoyant end of the year and start to 2021,” he says. “Where there may be integrations or your traditional spots and dots available at this stage of the year, we are finding them both close to capacity.

“That also extends into 2021. We’ve sold deals in Big Brother and Farmer Wants A Wife [for next year] already; I’m sure other networks are the same. You can see why the short-term approach to TV is going to see you get caught out.”

Ten’s Chief Sales Officer Rod Prosser says the signs of growth for October and November are indicative of a return to “some level of normality”.

He says one reason TV is seeing such a strong return in the final quarter is partly due to the networks being “flexible” in terms of booking deadlines and clients’ needs.

“There were some sectors of the media industry that were forced to reduce or even close because of COVID [such as travel, tourism and hospitality] and they are only now just beginning to start back up,” Prosser says.

“TV, despite revenues not matching audience growth, was still a channel that remained active throughout COVID and catered to the shifting needs of agencies and brands throughout that period.”


"Big ticket" audiences and the Christmas push

Carat Chief Investment Officer Craig Cooper told Mi3 TV audience levels and revenue growth in the fourth quarter could be considered “a once off in 2020”.

He says the growth in demand from advertisers is driven, in part, by some of the year’s highest-rating sporting events such as the NRL and AFL Grand Finals, as well as the State of Origin series, being moved into the final quarter of the year.

“There’s no doubt TV has been a consistent performer in 2020 and really has proven its value, particularly with audiences during COVID, in terms of both linear and BVOD,” Cooper says.

“However, when you’ve got massive ‘big ticket’ items such as grand finals and State of Origin all appearing in a three-month cluster, brands [will] dump a lot more investment into TV.”

Cooper also says another factor in a return to TV spend has been the “incentivisation” strategy taken by the networks during lockdown.

He says changes to rates and flexibility around bookings have put TV in “good stead” with brands that were struggling at the beginning of COVID.

“[TV networks] were fast, understanding and adapted well to the difficult market conditions,” Cooper says.

“They also made sure the channel didn’t lose its appeal through incentives and agile deals, while also continuing to push growing areas such as BVOD. I think it’s been a smart move that will pay off.”

Burnette says the major sporting events, combined with back half tent-pole content, will be an appealing offering for brands looking to enter 2021 in a “more confident position”.

“There are major TV events that aren’t usually there this time of year but that’s not the only reason behind the increased interest in investing in linear and BVOD [TV advertising],” Burnette says.

“Many brands are just starting to think about next year and want to be able to enter the new year with confidence. That will certainly be led by a strong sales period over Christmas and TV will be a key channel in providing the reach.”

Butterworth says there is also an element of marketers using television to drive brand equity and awareness, especially in sectors that saw limited media investment during lockdown.

“TV has been time-tested platform for efficient brand building and that’s something a lot of marketers will be thinking about over the next three months,” she says.

“The immediate focus will be on converting sales but there will also be a need to drive brand recognition ahead of larger-scale campaigns in 2021. That’s where TV will play to its strengths.”

Nine's Stephenson says advertisers are also looking to push their COVID-triggered fast track on e-commerce strategies.  "A lot of brands are engaging with us on e-commerce functionality and how they're pivoting their business. Brands that have traditionally been bricks and mortar businesses are accelerating that pivot to an omni channel model."

On BVOD and digital video, Stephenson says ad inventory was only "one part of the equation. What you really need to be focused on is daily active users," he says. "So you want lots of people coming back to your platform often. That's been our long term strategy. We invested in content that is specific for Nine like the Discovery and  NBCU deals that we did so that you transition away from 9Now being a catch-up service to an on demand platform, just ad funded.

"The digital market has rebounded quite quickly and through our eyes, was the first where we saw it bounce back, followed by television. Radio is recovering quicker than we had expected but it's still down year-on-year. That's largely due to the hyper-local nature of radio and its retail base. But it is recovering quicker than we had anticipated. For print there's such a significant proportion of print advertising that sits in the travel category so that is where we're seeing the slowest recovery at this point."

Not all are sold though. SBS Media Director Adam Sadler told Mi3 the network is currently “cautiously optimistic” on the performance of TV in the final quarter.

He says SBS is seeing signs of improvement driven by its distinctive content offering as it heads towards the end of the year, with Q4 showing strong demand signals and demand across all its platforms.

"It is still a really challenging time for some market sectors, but we’ve also seen some thrive in the current climate,” Sadler says.

“We’ve seen how some businesses quickly pivoted to adapt their operating models, adopting new technology and driving innovation to boost and generate new revenue streams.

“My assessment is that we’re seeing a tilt towards a two speed media recovery, with some emerging strongly and experiencing a positive turnaround, whilst others aren’t as fortunate.”

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Josh McDonnell and Paul McIntyre

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