TV advertisers braced for ‘exceptionally inflated’ winter
The first months of 2022 are predicted to be significantly more expensive to advertise on TV than previous years because of higher demand from brands coinciding with a post-Christmas decline in audiences.
This rise in TV costs per thousand (CPT) could be 30%+ more than in previous winter periods, Mediatel News’ analysis has found, while the prices in the subsequent months in 2022 could be even more inflated according to media agency sources.
The TV market has been booming this year with higher revenues for broadcasters and October 2021 was set to be one of the biggest trading months to advertise on linear because of early Christmas campaigns and surging advertising demand.
ITV announced last night at its ITV Palooza a “bumper year” for content lined up for next year spanning factual, drama and sport with predicted stand-out shows including new quiz show with Ant & Dec Limitless, and dramas Trigger Point (pictured above), The Ipcress File and Anne alongside its broadcast of the World Cup Qatar in Q4 2022.
Meanwhile Channel 4 recently landed a two-year deal to show rugby Super League games starting in Q1 2022. It also recently announced Nida Manzoor’s comedy show We are Lady Parts has been recommissioned for a second series and a new show The Defenders will air in 2022 giving “unprecedented access” to the day-to-day life of a team of barristers.
TV pricing is set monthly and fluctuates based on supply and demand – in this case viewing and advertiser spend. A lack of TV audiences is akin to a lack of “supply” in the TV market, which means high prices for spots when demand from advertisers is high.
[CPTs, above, are calculated on Mediatel Connected using the formula Revenue + 17.65% agency commission divided by Impacts.]
‘Exceptional’ year-on-year cost inflation
Becky Smithson, head of AV strategy at Havas Media Group (pictured below), said these spot price increases we have seen this year will continue into January and February 2022, so these months will “almost certainly” be more expensive than the previous year, with the inflation being “especially pronounced” for younger trading audiences.
Smithson explained there has always been “a traditional shape” to the monthly pricing fluctuations in TV advertising where January and February are among the cheaper months. It is common, she said, for CPTs to “ramp up” around Easter and into May and then drop down again over the summer, before peaking across the autumn months and dropping again in December.
She credited the booming TV market in 2021 down to “exceptional” year-on-year cost inflation from Q2 onwards driven by both audience decline and advertiser spend growth.
Bobby Din, partner at Goodstuff Communications, echoed this and added that hundreds of new e-commerce and direct-to-consumer entrants to the TV market because of its “twin ability to drive traffic and build brand” combined with declining linear viewing among younger audiences are pushing this inflation in TV advertising prices.
The relaxation of TV-booking deadlines by the UK’s biggest TV sales houses (ITV, Sky Media and Channel 4) is also a contributing factor, as is pent-up consumer demand, supply chain issues and changing consumer behaviour, according to Justine O’Neill, senior director at Analytics Partners.
Media agencies ‘prepared’ and have factored 30%+ inflation into plans
Din (pictured right) added that they are prepared for this inflation for “the dual reasons” of lockdown in January and February 2021 and the fact that TV has had “a hugely successful and sustained bounce back” since April 2021.
He said: “We’ve seen record revenue months for broadcasters and the appeal of the medium does not seem to be waning.
“We have prepared our clients to the fact that inflation in January and February could be 30%+. The inflation has been incorporated into planning costs which should hopefully lead to significantly less conversations around missing plans.”
O’Neill (pictured below) suggested brands looking to prepare for January and February need to make sure they examine their data and respond to changing consumer behaviour accordingly with a test and learn approach so they can “flex their TV spend” to increase chances for higher returns.
‘Weathering the storm’ of price changes throughout 2022
Smithson highlighted: “What is important to note however, is that despite this [viewing decline and revenue growth], versus 2022 as a whole, January and February will remain among the cheaper months of 2022, as the remainder of the year will also feel the impact of viewing driven cost inflation.”
Din predicted normalisation and stabilisation of costs from April onwards, with “some deflationary months” up to the World Cup in Qatar from 21 November to 18 December 2022.
He suggested “friendly” kick-off times would mean this period would be “the next real peak for inflation” as it falls in an already strong period for revenue with Christmas advertising.
Danger of overpromising and underdelivering
Din highlighted that the significant increase in ecommerce companies spending ad money in TV, while “great for broadcasters” has also created “significant challenges”.
He said: “A number of these advertisers have entered the heavily oversubscribed DR trading market which is commonly centred around buying less peak time and working to fixed pricing.
“The broadcasters are finding this a real challenge to fulfil and there is a fundamental need to reappraise how the market is traded. The danger is that the current success and appeal of Broadcasters could be undermined by under deliveries.”
Please note, the figures in this graph for October 2021 have been revised since publication.