“Who watches TV these days”…the lament of a broadcast executive with a #1 ratings hit
“Everybody’s struggling these days. That show that was number one? It had great ratings, but it didn’t make much money. The ads weren’t selling.”
This was the confession of a program official who was in the spotlight due to a surge in viewership. Increasingly, even programs that have become the talk of the town with the highest viewership ratings are “in the red” when looking at production and hosting costs. Broadcast advertising, which seemed to be recovering due to the implementation of terrestrial interstitials and the delayed execution of advertisements due to COVID-19, has recently been on the decline again. There are also reactions that the entire broadcast advertising market, including not only terrestrial, but also cable TV and generalized channels, is in a “crisis.”
With the development of OTT services such as Netflix and online video services such as YouTube, the sense of crisis in the broadcast advertising market is growing even more. At the 59th Baeksang Arts Awards held on April 28, Kim Jong-guk and Lee Eun-ji, who won the TV entertainment award for “Pisik University-Pisik Show,” as well as the male and female entertainment awards, were recognized for their roles in YouTube-based web contents such as “Jim Jong-guk” and “Gil Eun-ji,” respectively. It was interpreted that the center of entertainment, a barometer of mass popularity and topicality, has shifted from TV to online.
According to the ‘2022 Advertiser Status Survey’ conducted by the Korea Federation of Advertisers, online and mobile accounted for 44.2% of the estimated spending by media last year, compared to print (15.6%), terrestrial TV and radio (12.4%), and traditional and cable TV (11.0%). In terms of preference, online and mobile accounted for 60.3%, a significant difference compared to terrestrial TV (15.1%) and cable TV (12.3%).
In particular, 79.5% of the respondents said that online and mobile were the most likely mediums to increase advertising spending in the future, while 35.6% of the respondents said that terrestrial TV was the most likely medium to decrease, suggesting that the broadcast advertising market may shrink further.
“Some investors I met during the production process openly said, ‘I want you to release it on OTT instead of broadcasting it,'” said a director at a terrestrial broadcaster, adding, “I wonder if broadcasters are becoming subcontractors to global video platforms.”
“Advertising downturn harder than before corona”
According to the quarterly report released by SBS on the 12th, consolidated revenue for the first quarter of this year was 217.5 billion won, down 20.4% from the same period last year. In particular, advertising revenue of 83.4 billion won was not only down 36.4% from the same period last year, when the company enjoyed a special World Cup, but also the lowest level since the first quarter of 2020. Ad revenue fell from the COVID-19 period.
SBS released a series of popular dramas including “Model Taxi 2,” which had the highest viewership rate of 21% in the first quarter of this year, and “Lawyer,” while its fixed entertainment programs such as “Ugly Ugly” and “Goal Hitting Girls” were also rated as solid. Nevertheless, the decline in ad sales reflects the overall contraction of the broadcast advertising market.
“This reflects the fact that the TV advertising industry in the first half of the year was much more difficult than conservatively estimated,” said Lee Ki-hoon, a researcher at Hana Securities, as he lowered his price target for SBS by 6% to 47,000 won on Nov. 15, adding, “(SBS) has upside potential from a mid- to long-term perspective, but lacks upside momentum in the short term.”
CJ ENM is no different. In the first quarter, CJ ENM’s revenue fell 0.9% to 94.9 billion won, but the company posted an operating loss of 50.3 billion won. While there was also a 40 billion won loss in TV and a 40 billion won loss at overseas subsidiary Fifth Season, the biggest culprit was sluggish TV advertising. CJ ENM, which operates cable broadcasting channels such as tvN, Mnet, and OCN, reported a 30 percent year-on-year decline in TV ad revenue.
OTT threatens TV
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While broadcasting has been neglected, the OTT advertising market and influence, led by Netflix, has been growing rapidly. Through the ‘2022 Broadcasting Market Competition Situation Assessment’ released in December last year, the Korea Communications Commission determined that OTT operators’ revenue, utilization rate, and proportion of paid users have increased overall, expanding their influence on the overall broadcasting market토토사이트, including the paid broadcasting market.
In particular, Netflix has also entered the advertising market by introducing an ad-based low-cost plan since November last year. “It is possible that OTT’s entry into the advertising market will expand to domestic OTT operators in the long run,” the KFTC said.
According to subscription data analytics firm Antenna, the proportion of new Netflix subscribers in the U.S. with ad-supported basic memberships (5,500 won per month in Korea) increased from 9 percent in November last year to 19 percent in January this year. The number of ad-supported subscribers topped 1 million in the U.S. within two months of launch, according to the analytics firm.
While the share of Premium ($19.97, KRW 17,000), the highest-priced membership, remains in the low 20s, the share of Basic (KRW 9500), the lowest-priced membership, has dropped significantly from 41% in November last year to 16% in January this year. It is analyzed that customers who want to use Netflix at a low cost, even though it is not high quality and has advertisements, chose the ad-based membership.
As OTTs carve out their own ad markets, advertisers are likely to follow suit.
In July, U.S. TV ratings firm Nielsen reported that Americans spent 34.8 percent of their total viewing time on streaming platforms such as Netflix, narrowly outpacing cable TV viewing (34.4 percent).
The Wall Street Journal (WSJ) predicted that cable TV cord cutting will continue and streaming viewing will continue to rise. On the 18th, it was reported that ESPN, the leading sports network in U.S. cable TV, has begun full-scale preparations to offer sports events on its streaming service. Local media in the U.S. have analyzed that the current situation of more viewers canceling cable TV and subscribing to streaming services such as Netflix, Apple TV+, and Amazon Prime Video has negatively impacted ESPN’s revenue and spurred the company to enter the streaming market.