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Navigating Ratings Erosion in Linear TV
Ratings erosion in Linear TV is becoming an increasingly problematic factor for networks and their Upfront commitments to advertisers. But those who see the bigger picture in video consumption can take advantage and come out on top.

It’s now 2021, and many people (including experts) have said for years that TV is dying – and that it’s been dying for a long time. From the decline in network and program ratings we’ve been seeing, especially recently, that might seem like the simplest conclusion. But what’s actually happening – and what has been brewing for the past few years – isn’t that at all. What’s happening today is a phenomenon that more closely resembles the birth of TV than the death of it. People haven’t been moving away from the living room; they have been expanding it.

While it’s true that time spent with Linear TV has steadily declined for the average US consumer in the past few decades, minutes with overall video and TV-quality content are actually on the rise. This is largely fueled by growth in Connected TV devices, new streaming sources of premium TV content (OTT), and smartphone apps that can bring TV content with you wherever you go. For consumers, there is no more distinction between Linear TV, OTT, CTV and FEP content – there is only TV-quality video content that they want to access and watch. So, what does this mean for the current state of TV? Let’s take a look at a few truths in video in 2021:

  • TV content is now device agnostic. People are watching full length programming on their TV, tablet, desktop, and mobile device.
  • TV content is now source agnostic. Consumers don’t care if they’re watching the latest episode of This Is Us live on NBC’s broadcast station, streaming it live through the app on Apple TV, or catching it the next day through Hulu. All of this can be done on the TV in the living room, and can be accessed however and whenever consumers want it.
  • Consumers now have more options to access TV content than ever before, and they will choose to access it in the way that works best for them, largely based on price, content preferences, and ad (or ad-free) options.

Through services like Netflix, Hulu, Roku, Amazon Prime Video, YouTube TV, the TV network FEPs and others, consumers have now found cheaper, more on-demand ways of accessing the exact same content that Linear TV offers – plus loads of extra premium TV quality content that Linear TV doesn’t. And while overall video consumption continues to increase, 35.5 million households in the US are expected to be classified as “Cord-Cutter Households” in 2021. This is expected to grow significantly over the next 5 years, reaching 46.6 million by 2024.

The COVID-19 pandemic has only accelerated this trend, making consumers even more hungry for new content to access and binge. While broadcast networks have struggled with production delays, streaming platforms have filled that void with their dense catalogs. This has had a steep impact on TV ratings recently, with the four major broadcast networks showing ratings declines at the end of 2020 much greater than previously anticipated.

From a December 2020 MediaPost article:

This gets us to a central question: How can advertisers take advantage of these consumption shifts in TV and video? Thinking about video holistically has been a growing push within the advertising industry for a few years. The idea that less lines need to be drawn between TV, CTV, OTT, OLV, and even other forms of media is not that new. But now, it’s become necessary. For advertisers with 2020/2021 TV spend commitments, several TV networks are missing the mark on weekly, monthly, or quarterly GRP delivery for partners, and they are struggling to find the available GRPs that will make the commitments whole. Linear TV frequency continues to rise, and Linear TV reach continues to decline. There are continually fewer rating points to go around, yet the price of a new rating point only goes up because of supply and demand.

But here’s the 2021 solution: there is actually a whole wave of exactly the same “supply” that exists beyond traditional rating points.

If we boil a rating point down to its fundamental core, it’s simply a collection of impressions – a percentage of an audience universe that equates to a certain amount of eyeballs in a given demographic that has seen the associated content. As an advertiser, if I can reach who I’m trying to reach on exactly the same screen and in exactly the same show, do I care if it was delivered through a broadcast airwave, a cable, a satellite signal, or the internet? For whatever reason, many of us do – maybe it’s a stigma, maybe it’s old or unproven data, maybe it’s the fear of something personally untested or the fear of shaking up what’s been good for business in the past. But here are the facts: The consumer is having exactly the same content experience, and the advertiser is still reaching exactly who they intended, in exactly the content they intended.

So, if you’re an advertiser with Linear TV Upfront commitments that’s seeing GRP under-delivery this year, know that you are not alone. But also know that you should not be afraid to accept a one-for-one OTT or FEP make-good if a network offers one. If it’s the same content, demographic and 1:1 from an impression perspective, in many cases you should actually be pushing for that scenario over the linear make-goods, and here are three reasons why:

  1. The average CPM associated with an OTT buy is higher than for an equitable linear TV buy. Despite never wanting to see the under-delivery in the first place, if you have the opportunity to swap one linear TV impression with one OTT/FEP impression in the same content and with the same demo, you’re actually getting an upgrade from a dollar perspective (i.e. it would cost more to buy that OTT/FEP schedule than you spent on the missed linear TV GRPs).
  2. OTT/FEP impressions are more targeted and more measurable than Linear TV, which means potentially less waste and more ROI for your business, plus better data for future learnings and optimizations.
  3. You are very likely decreasing duplication in your buy and significantly increasing your reach. You’re now reaching non-cord-cutters through the original buy, plus reaching the cord-cutters and cord-nevers through your OTT/FEP makegood, all of whom still fall within your target audience.

Similarly, if you’re a TV advertiser who is in the scatter or DR marketplace, or is considering an upfront commitment in 2021/2022, know that Linear TV ratings are going to continue to decline, but also know that you can get ahead of it. You can:

  1. Map out your optimal video allocations across Linear TV and OTT/CTV/FEP based on the most up-to-date time spent data and landscape realities for your target, your objective, and the projected impact to your business. For example, if the objective is awareness against your target audience and you have $X budget, you should be running R/F scenarios of varying spend allocation mixes for Linear TV + OTT at $X spend to understand how your reach increases or diminishes at tiered percent allocations.
  2. Explore holistic or impression guarantees with TV partners. Whether it’s national or local, network or MVPD, there are avenues for buys across Linear TV and OTT/FEP. This can mitigate any potential under-delivery that could arise as a result of future ratings erosion and may actually increase the reach and value of your overall buy.
  3. Create a measurement and optimization framework to manage buys differently than you have when it’s only been Linear TV. For example, you can create rules or standards to optimize throughout the flight by tweaking allocations to the OTT vs Linear TV impressions based on performance, or to optimize across networks or programming (depending on how your buy is structured).

The reality is that the video landscape is going to continue to change, and that change is going to progressively come faster than it has in the past. It’s inevitable. The advertisers who can continue to leverage that change and lean into it with eyes open – who can turn under-delivery into an upgrade – are the ones who are going to maintain a competitive advantage over the ones who are inclined to stick with “what has always worked.”