Challenges Facing TV Industry Are Large
I’ve said it before and I’ll say it again: TV will continue to be a major marketing and entertainment tool long into the future. However, the challenge facing the industry is what to do in light of declining numbers and revenue. A recently released McKinsey study (via Ad Age) states by 2010, traditional TV advertising will only be one-third as effective as it was in 1990. If a television commercial only costs you one-third as much as it did back then, that might not be a problem, but that isn’t the case. Effectiveness is declining and television advertising costs are going up: that can’t continue. The study says over the last decade there has been a 50 percent drop in viewers while prime-time rates have increased by 40 percent. Advertisers (and their agencies) see the writing on the wall, and the demand for television advertising is weakening.
The Ad Age story also cites a Forrester research report that was discussed in a recent post here. That report confirms people in the 18-26 age group are leaving television in favor of more time online. If this trend continues, it doesn’t bode well for the future of TV’s advertising revenues. Some in the television industry are trying to use the online trend in their favor. CBS just announced they will be simulcasting their evening news on TV and the Web.
It will be interesting to see how much more television programming will become available on the Web in real time or archival format. Unfortunately, this approach is treating the symptoms—not the cause of the audience exodus. The bigger question that still looms is how the television industry will reconcile the growing dichotomy presented by rising ad rates and declining viewership.