Decades from now, media executives and investors will likely look back at 2023 as the year when linear TV advertising “officially broke.”
That’s the ominous conclusion from MoffettNathanson Senior Analysts Michael Nathanson and Robert Fishman, who have released a new report that offers a sobering assessment of non-streaming television’s fiscal health.
The investor note offered by MoffettNathanson bears the title “U.S. Advertising: Linear TV Enters Radio & Print Territory.”
If that isn’t a harbinger of tough times ahead for television, which in this case includes the cable TV channels suffering from a decline in MVPD subscribers, perhaps this assessment may sound some alarm bells for investors: We entered the year skeptical of some management teams’ promises of a second half 2023 recovery, and later started worrying if TV would end up following the path of radio advertising circa 2001. In all honesty, despite these concerns throughout the years, linear TV has ended up even worse than we expected.
It should be noted, however, that “linear TV” as determined by MoffettNathanson includes over-the-air and MVPD exclusive channels. With cord-cutting a continued concern for the cable television industry and growth initiatives including live sports bringing new core advertising opportunities for broadcast TV, this wholesale look at television may require a closer look.
That said, the core advertising concerns for linear TV are real, MoffettNathanson concludes.
“It is now clear that outside of sports advertising there should no longer be expectations of a recovery for linear TV advertising,” Fishman and Nathanson state. “Of course, there will always be noise in the ecosystem, with the Hollywood strikes and macro weakness appropriately taking some blame. That said, the strength digital advertising enjoyed throughout 2023 — with surprising macro strength helping propel a return to double digit growth — limits any hope that a stronger economy may deliver a meaningful shift in momentum.”
At the same time, Fishman and Nathanson say, the launch and growth of new ad-supported tiers at Amazon Prime Video, Netflix and Disney+ “should pull an even greater share of dollars away from linear TV.”
These new entrants may also, however, pull dollars away from advertising-supported video-on-demand platforms and free ad-supported television channels.
“In short, it is time to be even more concerned about the future of linear TV advertising and legacy AVOD and FAST channels,” Fishman and Nathanson conclude, as MoffettNathanson lowered its 2024 and 2025 outlook “to reflect the heightened risk the trends last year should continue to pressure media companies in the years ahead.”
But, the outlook is not inclusive of TEGNA, The E.W. Scripps Co., Nexstar Media Group, Gray Television, Cox Media Group, Hearst Television or any other non-“Big Four” station owner.
And, MoffettNathanson reiterated its “Buy” ratings for Fox Corporation and ABC Owned Stations parent The Walt Disney Co., respectively. It also maintains a “Neutral” rating for CBS News & Stations parent Paramount.
Colleague Craig Moffett has a “Buy” rating on NBCUniversal parent Comcast.
