Global Streaming Revenues Will Increase by 14% in 2023
by Frankie Karrer
3 Min Read
Advertising execs reflect on the year past, the year ahead, a shaky economic climate and uncertain advertising budgets—with Connected TV remaining steadfast above all.
4 Min Read
“What I failed to understand is that there is a lot of TV advertising that now couldn’t find the viewers because the 18- to 49-[year old] segment had moved on and were not watching linear TV,” lamented Netflix’s co-CEO Reed Hastings at The New York Times’ Dealbook conference this week, whose entrance into the ad-supported arena came a little late after losing 600,000 subscribers in the U.S. and Canada during the first quarter. The company only launched their ad-supported streaming model last month in an effort to attract new subscribers at a lower monthly fee. “I didn’t believe in the ad-supported tactic for us. I was wrong about that. Hulu proved you could do that at scale and offer customers lower prices…I wish we had flipped a few years earlier on that, but we’ll catch up.”
Hastings wished he had seen the writing on the wall sooner, though the tell-tale signs were there from the very beginning. Market research firm eMarketer tracked Connected TV spend since 2017 and the market has grown by double digits each year since, and will continue to do so until the end of its forecast period in 2026. Whether or not Netflix will catch up to the early adopters is yet to be seen, but they’re stepping into a massive opportunity by entering the ad-supported streaming market.
As we wrap up 2022, advertising executives and the C-suite have a lot to look back on—and a lot to look forward to more Connected TV in 2023. A Wall Street Journal article earlier this week with the headline “Ad Firms Predict Slower Advertising Growth for 2023” conveyed what we knew was coming. Media giant GroupM predicts that global advertising revenue will grow 5.9% next year (falling short of expectations from its 6.4% estImate in June this year). Media and data firms in the industry are echoing similar predictions: Media investment company Magna predicted ad revenue to grow 4.8% to $833 billion in 2023, however back in June that prediction was a 6.3% increase. Similarly, Magna had predicted a total 6.6% ad spend growth at the end of this year—down from the 9.2% it predicted in June because of dampened nonpolitical spending in the second half of the year.
On the linear television advertising front, advertisers have been pulling back or re-working upfront commitments. Jeff Shell, CEO of NBCU at UBS’s Global TMT conference explained in this Ad Age report that “we’re seeing some weakness due to a dip in ad revenues as marketers ‘are holding back.’ Part of that dip has been due to a weak scatter market—i.e. short-term ad buying.” However, this decrease illustrates that the industry has become more risk-averse, rather than an indicator of declining business, since pricing on ad inventory has remained high.
However, it’s not all doom and gloom. “We’ve reduced the growth expectation for almost every media category for next year, but we still expect that the market will stabilize and not fall,” said Vincent Létang, Executive Vice President of Global Market Research at Magna. The firm predicts that digital advertising spend will grow by 9% globally by the end of this year.
Meanwhile, Connected TV advertising remains a reliable marketing channel and brand-safe haven during this time. A solid example of this is streaming network Peacock, which reached 18 million paid subscribers this year—that’s three million higher than the figure the company reported in its third-quarter earnings in late October.
When asked about the success behind Peacock’s growth during a tumultuous year of economic uncertainty and hesitancy around ad spending, Shell revealed that its content-first approach boosted viewership time and average revenue per subscriber to $10. For example, 28% of Telemundo’s World Cup audience is streaming on Peacock, and NBCU was strategic about its content acquisitions (they pulled multiple franchises, like “The Real Housewives,” from Hulu). “[This resulted] in a business that on a run-rate basis is doing over $2 billion revenue already,” explained Shell of its two and a half year old business.
So, will 2023 live up to the C-suite’s predictions? Only time will tell. In the meantime, leaning on a performance-first mindset approach utilizing CTV platforms will continue to put C-suites and their brands first.
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