According to eMarketer, digital video consumption is on the rise leading to a seismic shift in the industry. Traditional TV viewers are expected to shrink nearly 10% by 2021 with the expectation of a sharp decrease of total media ad spending upwards of -30% reduction. Even in 2017, the trend is accelerating with eMarketer expecting a slowdown in ad spending, after 2016 benefited from the Olympics and U.S. presidential election.
As eMarketer explains, traditional TV advertising is slowing even more than expected as viewers cut cable and transition to digital video platforms. The estimates for ‘cord-cutters’ is expected to explode this year through 2021. The timeframe provided could explain cable-apocalypse is here. Per eMarketer,
In fact, by 2021, the number of cord-cutters will nearly equal the number of people who have never had pay TV (“cord-nevers”).
This year, there will be 22.2 million cord-cutters ages 18 and older, a figure up 33.2% over 2016. The overall tally is much higher than the 15.4 million eMarketer previously predicted. Meanwhile, the number of US adult cord-nevers will grow 5.8% this year to 34.4 million.
“Younger audiences continue to switch to either exclusively watching Over-The-Top video or watching them in combination with free TV options,” said Chris Bendtsen, senior forecasting analyst at eMarketer. “Last year, even the Olympics and presidential elections could not prevent younger audiences from abandoning pay TV.”
The hemorrhaging of traditional TV viewers will only accelerate. Overall, there are 196.3 million Americans that watch traditional TV, down 2.4% over 2016. By 2021, Emarketer thinks the total will fall nearly 10% compared to five years earlier. TV views over the age of 55 will continue to watch conventional TV, because that is tradition in their generation. The cord-cutting revolution is mainly impacting younger generations, as the old system is dismantled and the new system is ushered in.
Who are these disrupting digital streaming video services?
Back in August, WPP, the world’s largest advertising company cut full-year revenue forecasts and offered “terrible guidance”, which sent shares lower -13%. Goldman Sachs reports:
- Results confirm weak trends seen across advertising companies/TV, with ad spending cuts in fast-moving consumer goods being the common driver
- Key question whether pick-up in organic growth from 2H is credible
- Goldman sees new organic growth guidance as “achievable,” based on comments by several consumer goods companies on higher ad spending in 2H, easier comparables, recent improvement in WPP’s new business performance
Paul Verna, a principle analyst at eMarketer listed several factors in the acceleration of cord-cutting trend:
- First, traditional pay TV operators are increasingly developing streaming platforms, such as Dish Network’s Sling TV.
- Second, networks such as HBO and ESPN have launched standalone subscription services that allow users to tap those channels without a cable subscription.
- Third, digital players like Hulu and YouTube are now delivering live TV channels over the internet at reasonable prices—including sports properties that were previously available only through traditional distribution.”
Average time spent per day with video by US Adults, by device, 2015-2017
While the end of legacy cable may not be here, it is approaching. America is currently in a transitional period and is increasingly gravitating to the cheapest possible option away from cable, and unless cable providers drastically change their cost structure and pivot their business models, the revolution in America's viewership habits will be televized for all to see.