Is Digital Media Starting to Eat Into TV Advertising Revenue?

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Digital is already the top media category in 14 of the 73 markets analyzed by one research firm, with the U.S. expected to reach parity between digital and TV in the coming years

Is digital media starting to eat into TV advertising revenue amid changing viewing patterns? The question was a recurring theme on Monday, the first day of the 42nd annual UBS Global Media and Communications Conference in New York.

Wall Street analysts and other industry observers have been discussing the topic in recent quarters amid weaker TV ratings and advertising trends.

David Poltrack, CBS Corp.'s chief research officer, addressed the question head-on in his annual presentation at the UBS conference. Without going into much detail, he said that some ad dollars are moving from TV to digital. “Should advertisers be investing in a full array of new digital media options? Absolutely,” he said. “Should they be funding these investments from their TV advertising budgets? Absolutely not."

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Vincent Letang, executive vp and director of global forecasting for Magna Global, said in a presentation that digital now accounts for close to a 30 percent market share worldwide, with some markets ahead of that, such as the U.K. where it has reached 47 percent.

By 2019, digital media will catch up with TV globally in terms of ad market share, earlier than previously thought, he said. Letang predicted the two ad categories would converge at around 38 percent share in 2019, adding that it was more due to strong growth in digital rather than TV weakness. In the U.S., digital will be on par with TV ad spending in 2017, he projected.

"Digital media is already the number 1 media category in 14 of the 73 markets analyzed by Magna," the company said, including in the U.K., Australia, Canada, Germany, China, Sweden and the Netherlands.

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TV ad growth would hit 5.2 percent this year, compared with 17.2 percent in digital media, followed by 15.1 percent in 2015, Letang said.

In the U.S., TV viewing on the main TV screen peaked in 2009 with 31.6 hours per week, Magna said. “This year has been very bad,” Letang said, mentioning 29.8 hours watched per week. He predicted it would drop further to 27.1 hours. Letang argued that some of the lost viewing time has moved to digital media platforms where people watch TV content, but some time has also been lost to non-TV content consumption.

Zenith Optimedia said TV ads globally account for 39.6 percent of all ad spending, but emphasized that it "has now peaked." The firm predicts the market share to drop to 37.4 percent in 2017.

And Magna said: "Marketers are now more comfortable with the level of brand safety and accountability provided in the digital media space than they were just one or two years ago."

GroupM futures director Adam Smith said that 88 percent of ad growth in 2014 and 2015 would come from digital media. Print media has been “the organ donor of digital,” he said about where digital media’s growth has come from. He said that its future gains would not necessarily have to come out of TV in such markets as the U.S. “TV dollars are much further up in the canopy,” he said, calling print more “low-hanging fruit.”

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Letang during a Q&A portion with other prognosticators also said that “digital has risen almost entirely at the expense of print.” Zenith Optimedia CEO Steve King said that innovation and scheduling, including more shows that invite participation and interaction, have helped TV remain relevant and attractive for live-viewing.

WPP CEO Martin Sorrell
later at the conference said that during this year’s advertising upfront market, there was a big debate between buyers and sellers about whether TV ratings drops have been a structural or cyclical phenomenon and what role digital media has played. “The truth is it was a little bit of both,” he argued.

Viacom CEO Philippe Dauman didn't say much on the topic. Some ad dollars are moving to digital media, but "broadly, we are all moving there," he said, mentioning how entertainment firms are increasingly making content available on digital platforms.

Twitter: @georgszalai