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Local TV Advertising Provides More Bang for Brands and Bucks for Stations

December 9th, 2016   ||    by Monta Monaco Hernon   ||    No Comments

Broadcast stations brought in $20.8 billion from local TV advertising in 2016, according to a new report by BIA/Kelsey. This amounts to 67.4 percent of the $31 billion of total revenue for the year, making local TV advertising the biggest earner by far for these companies.

In comparison, broadcasters amassed $7.3 billion from retransmission consent fees, which amounts to a 23.6 percent share; $1.3 billion from digital media, a 4.1 percent share; and $1.5 billion from other sources, a 4.9 percent share.

Brand Benefits

The dominance of TV advertising in the station revenue game is not surprising given the benefits it offers brands. Despite talk that digital would eat away television’s share, evidence shows companies are returning to broadcast to assuage sales declines. Chipotle, for example, placed ads on TV for the first time since 2012, and political television advertising broke records this year. Similarly, Turner participated in a joint analysis that demonstrated brands lost three dollars in sales for every dollar reduction in their TV ad spend, AdWeek reported. A senior VP at American Express pointed out his company has found that matching the reach of one day of broadcast would require two weeks of digital.

Further Reach

National brands are taking to the local airwaves, too, with projections for 2020 at $70 billion, underscoring the return on investment (ROI) broadcast TV offers. While digital was once the bastion of targeted advertising, data-driven buys, and creative messaging, the rise of programmatic platforms for local television has changed this dynamic.

Advertisers are now able to leverage the data analysis programmatic offers to make sure their ads appear in front of desired viewers; doing so provides an opportunity for personalization and cross-platform marketing that follows consumers across devices with continuity of messaging.

Fraud Concerns

Another issue that has perhaps contributed to the attractiveness of local advertising is the fraud currently plaguing digital. Recent studies have shown that $7 billion is wasted every year on digital ads that are purchased but never seen by consumers. Some of this is covered up by bots that simulate traffic, or so-called invisible ads. Meantime, despite declining ratings due to audience fragmentation and increasing content choice, television still commands relatively large audiences compared to other types of media.

Although BIA/Kelsey predicts that local TV advertising revenue will decline slightly in 2017, to $19.7 billion (compared to $20.8 billion this year), this is not exceptional news given that 2016 had both a presidential election and a summer Olympics. It’s also interesting to note that BIA/Kelsey stats also showed that of the $31 billion in total revenue for broadcast stations, 80 percent was earned by 18 groups:

  • Six publicly traded entities (Nexstar, Sinclair, Tegna, Gray, Meredith, and Tribune) accounted for 31.9 percent, or $9.9 billion.
  • Four owned-and-operated stations (ABC, CBS, Fox, and NBC) contributed 30 percent, or $9.3 billion.
  • Eight private companies (Hearst, Univision, Raycom, E.W. Scripps, Cox Media, Hubbard, Corillera, and Quincy) brought in 21.4 percent, or $6.6 billion.

Whether or not the balance between these players shifts, odds are local TV will continue to prove itself a worthwhile channel in which advertisers can invest.

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