Shannon Bond and Matthew Garrahan, Financial Times, February 22, 2015
With YouTube to watch, Instagram pictures to take and Facebook, Snapchat and other social media platforms to explore, a generation of young Americans that used to turn to television for entertainment is finding its fix elsewhere.
They are watching on-demand services, such as Netflix and Hulu and the BBC iPlayer but turning off “linear” TV, or tuning in at a set time on a set channel. This migration has been gradual but is starting to show up in the quarterly results of some of the world’s biggest media companies--and investors are beginning to notice.
Television executives started sounding the alarm last autumn when Viacom, 21st Century Fox, Comcast, which owns NBCUniversal, and Walt Disney began reporting lower advertising revenues for some or all of their networks. Todd Juenger, senior analyst with Bernstein Research, called the ratings declines “alarming” and “unprecedented”.
The trend has continued into the most recent round of financial results, with Viacom among the worst hit. The company, controlled by 91-year-old billionaire Sumner Redstone, has suffered some of the sharpest ratings declines, with viewership down 18 per cent in the fourth quarter, according to a MoffettNathanson analysis of Nielsen data.
BET, which is aimed at African-American audiences, fell 22 per cent, the children’s network Nickelodeon was down 17 per cent while MTV declined 14 per cent.
Viacom’s profits have held steady but on the company’s recent investor call, Philippe Dauman, chief executive, alluded to significant changes in audience habits. “It is no secret that there are far-reaching shifts taking place in our industry,” he said.
His peers agree. In a nod to the popularity of subscription services such as Netflix, Jeff Bewkes, chief executive of Time Warner, owner of networks such as CNN and HBO, recently said television was “in the midst of a secular shift to on-demand consumption”. That has pushed networks including HBO and CBS to launch their own online offerings.
Channels aimed at young viewers are not the only ones being hit. Viewership among 18-to-49 year olds of primetime broadcast and cable shows--some of the most valuable television advertising available--dropped 7 per cent in the final three months of 2014, the third consecutive quarter that audiences shrank, according to MoffettNathanson, the analysts. “This is just about the worst decline we have seen,” it said.
Mr Juenger at Bernstein Research argues that television is undergoing a “structural” migration from ad-supported networks to streaming video services. “We don’t think those viewers are coming back,” he warns.
While the TV industry struggles to hammer out new models for revenue and measurement, advertising executives say they are following consumers in expanding the definition of television itself to encompass on-demand viewing, streaming and digital video.
“I believe you have to redefine what television is. It’s more about moving content,” said Amir Kassaei, chief creative officer for Omnicom’s DDB Worldwide, an advertising agency.
“There is still the old media platform called TV, which is strong and you should use it if you need to build awareness and build a bigger audience. But the way people are interacting with moving content more broadly is changing, especially with young people. We have to be selective if we are trying to reach people in the right way.”
The amount of time that British children spend watching TV has fallen by 22 per cent since 2010, according to industry data from Barb. Many industry figures have argued that the shift away from live TV is a kids’ phenomenon, which will disappear as audience grow older.
In fact, says Toby Syfret, an analyst at Enders Analysis, “the habits of the parents are changing too”.
