Total Ad Spend Grows While TV Ad Revenue Declines, Illustrated By General Mills and Corus

While this is normally a slow time for quarterly earnings, this week two companies I monitor with non-calendar year fiscal years provided new results for the period between March and May of 2023 illustrating some important trends.

On Thursday, Canadian broadcaster Corus reported a 12% decline in ad revenue for its television properties, in between the most recent prior quarters’ declines of 11% and 15%.   Although these results solely relate to the Canadian market, they are not dis-similar what we’ve seen from many of the world’s other leading owners of TV networks in recent quarters.

This followed news on Wednesday when packaged goods company General Mills reported slowing, if still positive organic revenue growth of 5% for the same period, featuring “double digit” increases in spending on media (ending their fiscal year with 17% growth in ad spend during a period when organic growth was up 10%).

Although I don’t believe most large marketers increased advertising spending by such high levels in the past year, commentary from other large marketers’ management teams on earnings calls has similarly conveyed that advertising budgets are growing. 

So what’s the disconnect? One factor explaining is that moderation from unsustainably high levels in 2021 and early 2022 towards low single digit levels in many places has created a “feeling” of decline. A second is that many of the sources of growth are difficult to monitor with much precision or don’t get as much attention from traditional media owners. The likes of TikTok, Apple, Uber, Walmart and other retail media networks are all growing rapidly, and representative of larger marketers’ efforts to re-diversify their spending among newly-emerging scaled suppliers.

However, for TV network owners, ad revenue declines are likely to continue this year and beyond, even as perceptions of growth improve. Shifts of budgets to newer platforms will continue, and Alphabet, Meta and Amazon are unlikely to collectively lose much “share of wallet” any time soon.

If TV network owners want to return to growth, it will be increasingly important for them to recognize that how they compete for consumers is different than how they compete for advertisers. These media platforms are “premium” to consumers in the sense that they can charge directly for content in ways that others generally can’t. But to marketers, the distinction isn’t as relevant. In many instances, an audience may be more premium outside of television as we have historically known it.

I think that if premium suppliers of video-based content more aggressively embraced efforts to measure video-based audience activity across all devices to fully reflect consumption of YouTube, TikTok, Snap and others, the television industry could redefine itself and become better positioned for a return growth or better mitigate declines, even if individual TV network owners would have to alter how directly they compete with newer media owners.  In the US, delayed acceptance of Nielsen’s new Nielsen One has been harmful to the industry’s long-term interests, and its general reluctance to include social platforms as part of a comparable video universe doesn’t help either.

The most likely outcome will remain somewhat muddled, with a little bit of progress here and there, but mostly incremental change leading to owners of TV-based properties competing for a shrinking “pie” of advertising budgets. As a result, I think opportunities for growth for traditional TV network owners will most likely come to those who are more aggressive in including other forms of digital-focused ad inventory beyond TV, or otherwise focus on driving subscription and non-advertising-based revenue streams.