The advertising environment for legacy media companies does not appear to be improving.
On average, media networks — whose parent companies include Disney (DIS), Paramount Global (PARA), Warner Bros. Discovery (WBD), Comcast (CMCSA), and others — grew 12% in revenue from linear ads during the third quarter. A decline has been registered. According to a new note from Macquarie, there was a decline of 13% in the second quarter.
companies Warned that the negative trend is likely to continue in the current quarter. For example, Warner Bros. Discovery’s stock declined last week after it noted ongoing weakness in the advertising market that could impact visibility for 2024.
CFO Gunnar Weidenfels said in the company’s post-earnings conference call that 2024 “will have its share of complexity, especially as it relates to the possibility of continued sluggish advertising trends.”
Analysts and media executives alike had expected an improved TV advertising market in the second half of the year, which ultimately did not materialize as ad buyers remained under pressure.
Macquarie analyst Tim Nolen wrote, “All media networks are facing a stretched linear advertising market and all but Warner Bros. Discovery have seen massive increases in the cost of play this fall, driven by direct-to- -Offsets any positives from turning the consumer corner into profitability.” A recent note to customers. “Linear TV ads continue to decline amid little sign of ad market recovery; at least it’s not getting worse.”
Nolen said he expects the overall linear advertising market to decline by 12% in the current quarter, as cord-cutting trends continue to hurt traditional television businesses.
“Cord cutting has continued to trend downward by less than 10% year-on-year for the last three quarters,” he said. “Total pay TV subscribers in our tracked group declined to 40.2 million, with a loss of more than 1 million subscribers in Q3 alone.”
The story of ad spending outside of traditional TV shows is different
Macquarie analyst Tim Nolen expects the overall linear advertising market to decline by 12% in the current quarter, as cord-cutting trends impact traditional television businesses. (MyTrueStory Photography via Getty Images)
It’s a very different story with direct-to-consumer (DTC) services, which recorded 29% average ad revenue growth thanks to new ad tiers introduced by Netflix (NFLX) and Disney.
“DTC is gaining momentum as cord cutting continues,” Nolen said. “All media network platforms reported solid growth in their paid streaming subscriptions in Q3.”
Tech giants like Google’s parent company Alphabet (GOOG, GOOGL) and Meta (META) also saw new strength in digital advertising.
Alphabet’s advertising business reported revenue of $59.7 billion last quarter, beating the consensus estimate of $58.9 billion and well ahead of the year-ago period’s $54.5 billion.
Meta saw a similar pop with its Q3 ad revenue, coming in at $33.64 billion, while analysts had expected $32.94 billion and saw $27.34 billion in Q3 2022. The parent company of Instagram and Facebook also beat ad impression estimates, reporting growth of 31% year over year, compared to the expected 29.6%.
Even companies like satellite radio giant SiriusXM (SIRI) and audio streaming service Pandora saw improving advertising markets despite declining subscriber numbers in the latest quarter.
Overall, the first half of 2023 saw non-linear TV ad sales – which include advertising across video on-demand platforms, connected TV and free ad-supported services, or fast formats – grow 7%, according to a recent report from the media. increased by. Investment and intelligence company Magna Global. Podcasting advertising grew 14% while digital out-of-home advertising grew 9%.
“Advertising revenues from traditional media owners are stagnant or declining despite the growth of their digital formats,” the report said. “But so far, the attractiveness of these new formats to consumers and advertising is only diminishing, not compensating for the long-term decline of traditional linear formats in audiences and advertising sales.”
alexandra canal Is a senior reporter at Yahoo Finance. Follow him on Twitter @allie_canal, linkedin, And email her at [email protected].
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