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Inspired by the 2019 State of Digital Marketing report by Luma Partners, I’ve decided to combine what they have shared with some of the data points I’ve been collecting over the past few months and come up with my 4 predictions for the TV and video industry in 2020 and related trends over the next two or three years. Based on these predictions, we can also speculate what advertisers and companies should do to keep their competitive edge.
1. PREDICTION: TV advertising will see meaningful inflation in 2020 and beyond
Although TV ratings have been on a steady decline over the past eight years and more people are cutting the cord, the level of advertiser spending is expected to stay flat in 2020. With fewer “eyeballs to reach” there is a natural scarcity that pushes inflation up given the steady amount of money coming in.
IMPLICATION 1: Advertisers, should put effort into scaling other channels to reach a large enough audience to achieve their business goals while maintaining comparable ROI (or ROE). TV is still a massive channel with consistent parameters, while other digital channels are extremely fragmented when it comes to creative, targeting, buying, and measurement, which makes it harder to achieve consistent results at scale.
2. PREDICTION: NFL will remain the most valuable property in the US for a while
According to the Luma Digital report, here’s the state of linear TV.
Almost 90% of the linear TV consumption in the US is made of live TV
Sports represents 90% of the live TV consumption.
NFL represents 61% of the sports viewership, which makes it 50% of the live-TV consumption.
Yet other sports are priced at a premium and not aligned with their relative size. Looking at the graph below, you can see how even if the reach of other leagues is a fraction of that of the NFL, the relative CPM price for advertisers is much closer to the one of the NFL.
When we combine these stats with the fact that E-sports was already the third sport in the US in 2018 for viewers, we can start drawing some interesting conclusions.
IMPLICATION 2: While consumer-specific passion points are important, to speak to the desired audience and position a brand, it’s worth evaluating the relative return and scale on the specific investment. Early-movers in eSports may be able to get a meaningful advantage.
3. PREDICTION: 2021-22 could be the year of a major tv shakeup given the digital alternatives and the schedule for sports deals renewal
As outlined by the Luma Partners analysis, all major digital players have a TV replacement offering.
And also, as correctly pointed out, starting from 2022 cash-rich digital players could (and should) secure expiring league rights.
IMPLICATION 3: if live sports are not longer broadcast-exclusive, TV networks will lose much of their appeal. Yet, timing is of the essence and moving too early may represent a gamble. It’s worth taking a waiting pattern and hedge the future bets on all fronts.
4. PREDICTION: The video industry will evolve into a hybrid
Consumers already have many options to stream content on demand.
And OTT options are also widely available.
Yet advertising in the connected tv/digital video landscape is still extremely fragmented.
The connected-TV/digital-video space will keep evolving until common standards are going to be widely adopted, but we are still in the early phase of alignment between the key industry players.