NEW YORK — With Country superstar Carrie Underwood nearby performing for NBC’s “TODAY,” the TVB Executive Summit was just getting underway inside the famed Studio 8H of 30 Rockefeller Plaza. Inside, MAGNA EVP of Local Investment Joe Cerone was readying to appear on a panel discussion focused on agencies alongside AdImpact & Smart Media Group President/CEO Kyle Roberts and RPA SVP/Executive Director Brian McCord.
Cerone’s discussion likely touched on MAGNA’s fall 2023 U.S. ad forecast update, which trumpets that digital advertising has “finally” recovered. Alas, the portrait for traditional media is hardly as shiny as the east facade of 30 Rock.
In fact, the growth disparities between digital and traditional media in the three-month period ending June 30 are perhaps alarming.
According to MAGNA, just pure-play digital media vendors (Search, Social, Video) “really benefited” as total ad spending accelerated 4.4% year over year in the second quarter of 2023.
Search/Social/Video enjoyed an 8.7% jump in ad sales in Q2.
Traditional media companies experienced a 4.1% year-over-year ad sales decline in Q2.
While that’s downbeat data for broadcast media leaders, the digital advertising recovery — combined with a slightly better economic outlook — led MAGNA to raise its market growth forecast for 2023 and for 2024. It illustrates just how important digital ad revenue growth opportunities remain for television and radio in the U.S.
MAGNA’s full-year, all-media ad spend 2023 forecast
5.2%, up from 4.2%
Digital Media Owners +9.6%
Traditional Media Owners -3.6%
Looking at 2024, MAGNA raises the ad spend forecast from 5.0% to 5.6%. Including cyclical spend, it is up 8%.
DIGITAL DOMINATION
To further show how essential Digital is to the U.S. advertising landscape, MAGNA predicts digital media owners will grow ad sales by 9.8% next year. In contrast, cyclical spending “will mitigate the erosion of non-cyclical ad sales” for traditional media owners.
This puts trends at -2% ex-cyclical for traditional media, but results in growth of 4.3%
when including cyclical/political. For broadcast television in particular, that’s essential — especially as retransmission consent revenue, for some companies, continues to outpace advertising revenue.
In prepared comments distributed ahead of the TVB Executive Summit, MAGNA EVP of Global Market Intelligence Vincent Létang said, “Six months ago the media industry was bracing for recession, but advertisers kept calm and continued to support their brands and sales through media investment. As the U.S. economy and advertising spending were both
stronger than expected so far this year, and digital media is finally recovering from its 2022 woes, MAGNA raises its full-year ad revenue growth forecast to 5.2% for 2023 to reach $337 billion.”
If there is any consolation for broadcast radio and TV’s C-Suites, it is this: the ad sales decline in the second quarter of 2023 wasn’t as severe as that seen in Q2 2022.
It should also be noted that MAGNA lumps TV and Radio with out-of-home, cinema and the collapsing Publishing category. As such, struggles with eroding ad sales for newspapers and magazines are factored in to the TV, Radio and OOH numbers, in addition to theatrical spot activity boosted by Barbie and Oppenheimer.
On this basis, traditional media ad sales, while off 4.1% in Q2 2023, suffered a 6% year-over-year decline in the second quarter of 2022.
Looking at the data sequentially, MAGNA says Q2 2023 “was marginally better” than Q1, but most ad formats continue to suffer declining sales. Cross-platform national TV ad sales and Audio ad sales were down 4%, local TV was off by 5%, and Publishing dipped by 7%. The only traditional media category to grow in first half was OOH, rising 2.5% in the second quarter.
But what about the digital revenue that traditional media is enjoying today?
MAGNA states what is obfuscated in quarterly earnings calls focusing on the robust percentage growth in digital, without noting that for many companies it remains a sliver of the overall revenue generation machine.
“The ad revenues of traditional media owners continue to stagnate or decline despite the growth of their digital formats,” MAGNA states. Indeed, for every Townsquare Media or Entravision there are companies where digital remains much smaller of a revenue generator than linear. In the first half of 2023, MAGNA determined that non-linear TV ad sales (inclusive of AVOD, Connected TV, FAST channels) grew by 7%. Podcasting advertising grew by 14%, while “DOOH” grew by 9%.
What’s the problem? “[S]o far, the attractiveness of these new formats for consumers and advertising is just mitigating, not offsetting, the long-term decline of traditional linear formats in audience and ad sales,” MAGNA concludes.
LINGERING MACROECONOMIC QUESTIONS
One source of concern for MAGNA is retail sales. In June, growth slowed down, resulting in a small -0.6% year-over-year dip. MAGNA warns that this may lead some consumer brands to restrict marketing budgets and advertising spending.
Meanwhile, the Toronto Star reports that the city’s restaurant traffic, based on OpenTable data, has plummeted. While COVID-19 is on the rise again, analysts fear consumers are pulling back on their discretionary spending. Will this become a trend in the U.S.?
With that question lingering the minds of ad sales leaders, broadcast media must already face MAGNA’s downgrade in its ad revenue expectation for traditional media owners in
radio, television, publishing, and OOH, to -3.6% from -3.2%.
MAGNA’s next forecast is due in December 2023.
