Analysis: The state of the TV advertising market in 2020

“It could have been worse.” That’s the verdict of advertising giant GroupM in newly published research about the state of the advertising market in 2020. 

Nine months into the Covid-19 pandemic, GroupM – whose global media buying agencies include Mindshare, MediaCom and Wavemaker – predicts an ad spend decline of 4.4% for the UK for 2020, which is much improved on its prior expectation of a 12.5% decline that it forecasted in June. 

For the US, GroupM says the decline will be closer to 9% rather than a predicted 13% decline. 

The figures are surprisingly good given that the advertising industry more or less shut down in March, with commercials production more or less halted as the pandemic took hold.

Advertisers around the world quickly started to reign in spend as lockdowns were announced. In the UK, ITV’s advertising revenue was down 42% in April, while Fox in the US saw revenues halve.  

Advertising work then started to pick up in the summer, returning to almost normal in September and October with tech firms leading the charge. 

GroupM says the advertising industry is experiencing a K-shaped recovery – the pandemic has seen rapid acceleration for e-commerce and advanced digital services and cratered industries like restaurants, bars, travel, entertainment and traditional retail.  

“Although streaming services receive much of the industry’s attention, traditional ad-supported television continues to do the bulk of the work supporting marketers’ brand-building efforts,” GroupM 

Digital advertising is the “bright spot” in an otherwise dark year for the industry in both the US and the UK, adds GroupM.  

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In the US, it estimates that pure-play digital advertising will grow by 5% during 2020 on an underlying (ex-political advertising) basis, following on 2019’s 17% rate of growth. During 2021, the firm estimates that digital advertising will account for 55% of all advertising that it tracks. 

Political advertising during the US presidential election has proved to be an important source of growth for digital media during 2020. Roughly 4% in total digital advertising was for political candidates and issues advertising, representing around 3% of the year’s gains.   

In the UK, GroupM estimates that pure-play digital advertising will grow by 4.9% during 2020, following 2019’s 16% rate of growth.  

Television advertising has also fared better than expected. In the UK, GroupM estimates it will fall by 10%, the worst rate of decline since 2009, but better than anticipated earlier this year. Its 2021 forecast now anticipates a 10% gain and a return to 2019 levels in 2022. 

“Although streaming services receive much of the industry’s attention, traditional ad-supported television continues to do the bulk of the work supporting marketers’ brand-building efforts,” says GroupM.  

National TV advertising in the US will see a decline of 7.9% during 2020 and rebound to grow by 6.6% during 2021 before returning to a flat or slightly declining longer-term trend.  

“At this pace, national TV is faring better than every other category of media other than digital,” says GroupM. 

The agency’s findings echo reports from the TV industry. At the height of the pandemic, the UK’s Channel 4 saw its revenue fall by half, and cut its programme budget by £150m. Chief executive Alex Mahon recently said the picture has improved and advertisers have returned, and that its content spend will go up “massively” next year to help it compete with streamers such as Netflix.  

Last month, ITV’s CEO Carolyn McCall predicted an annual rise in advertising revenues for the final quarter of 2020, saying that “advertising trends are improving.” 

Cinema has been most heavily affected advertising medium by the pandemic, with an estimated decline of 80% for 2020 in the UK. 

GroupM expects a strong rebound of 160% in 2021 as film studios seek to monetise their backlogs with a surge of highly anticipated launches.  

“While this rebound may seem optimistic, we note that it only brings cinema back to 52% of pre-pandemic advertising spend.” 

GroupM notes that studios are likely to release some upcoming titles on their direct-to-consumer platforms. “Even once the virus has receded, it seems unlikely studios will release as many titles in theatres as they did in pre-pandemic years, meaning admissions are likely to remain below 2019 levels for some time.    

Elsewhere, GroupM thinks audio advertising will fall by 16% and 27% in the UK and US respectively.  

Print media will fall by 23% this year in the UK. In the US, the figure is 20% for magazine publishers and a 30% decline for newspaper publishers. “It is our view that neither the magazine nor newspaper sectors will ever exceed $10 billion in ad revenue in their current forms, even including existing digital properties.” 

Looking ahead, GroupM predicts robust growth for 2021 as vaccines allow normal life to return in the second half of the year. In the US, the ad market will rise 11.8% on an ex-political basis, or 6% including it. “For subsequent years, we anticipate slightly higher growth than we previously forecast—now 5% in 2022 followed by 4% in 2023 and 2024—to reflect what we think will be an accelerated pace of investment in digital media by marketers of all sizes.” 

In the UK, Brexit uncertainty still weighs on the British economy.  

“At a minimum, our forecasts anticipate some degree of disruption to the economy in the early part of 2021 as adjustments are made; however, we think Brexit’s impact on the advertising market will be limited to a shift in spending away from the first quarter rather than meaningful full-year cuts. More generally, we continue to assume that “normal” activity will return by the second half of the year, which pre-supposes that Brexit will not cause ongoing problems and that an effective vaccine will be widely distributed across the population.” 

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