Cord Cutting Bites into TV Ad Spending

Sept. 14, 2017
eMarketer has reduced its estimate for U.S. TV ad spending due to faster-than-expected growth in cord cutting. The research house expects ...

eMarketer has reduced its estimate for U.S. TV ad spending due to faster-than-expected growth in cord cutting. The research house expects the U.S. pay TV audience to shrink nearly 10% by 2021.

This year, U.S. TV ad investment is expected to expand just 0.5% to $71.65 billion, a figure down from the $72.72 billion predicted in eMarketer's Q1 forecast for 2017. As a result, TV's share of total media ad spending in the United States is expected to drop to 34.9% and is expected to fall below 30% by 2021.

"eMarketer expected a slowdown this year in TV ad sales, after 2016 benefited from both the Olympics and U.S. presidential election," said Monica Peart, eMarketer's senior forecasting director. "However, traditional TV advertising is slowing even more than expected, as viewers switch their time and attention to the growing list of live streaming and over-the-top (OTT) platforms."

Consumers shifting their attention to OTT digital video platforms in place of pay TV options - known as "cord-cutters" - is a key reason for anemic growth in TV ad spending. eMarketer has increased its estimates for cord-cutters substantially for 2017 through 2021. By 2021, the number of cord-cutters is expected to nearly equal the number of people who have never had pay TV ("cord-nevers").

This year, there are expected to be 22.2 million cord-cutters ages 18 and older, up 33.2% over 2016. The overall tally is much higher than the 15.4 million eMarketer previously predicted. Meanwhile, the number of U.S. adult cord-nevers is expected to grow 5.8% this year to 34.4 million.

"Younger audiences continue to switch to either exclusively watching OTT video or watching them in combination with free TV options," said Chris Bendtsen, senior forecasting analyst at eMarketer. "Last year, even the Olympics and presidential elections could not prevent younger audiences from abandoning pay TV."

Overall, 196.3 million U.S. adults are expected to watch pay TV (cable, satellite or telco) this year, down 2.4% over 2016, eMarketer predicts. By 2021, that total is expected to have fallen nearly 10% compared to five years earlier. The number of U.S. pay TV viewers ages 55 and older is expected to continue to rise throughout the forecast period, while every other age group is expected to decline.

"The acceleration of cord-cutting is the result of several factors," said eMarketer Principal Analyst Paul Verna. "First, traditional pay TV operators are increasingly developing streaming platforms, such as Dish Network's Sling TV. Second, networks such as HBO and ESPN have launched standalone subscription services that allow users to tap those channels without a cable subscription. And third, digital players like Hulu and YouTube are now delivering live TV channels over the Internet at reasonable prices - including sports properties that were previously available only through traditional distribution."

At the same time, U.S. adults are spending less time in front of the TV. This year, the average time spent watching TV (excluding digital) among U.S. adults is expected to drop 3.1% to 3 hours 58 minutes, the first time it has dropped below 4 hours a day.

Digital video consumption, meanwhile, is on the rise. U.S. adults are expected to consume 1 hour 17 minutes of digital video this year, up 9.3% over 2016.