Pandemic's Video 'Habits' Seen Having 'Lasting Effects'

Broadcast ad revenue is improving as jurisdictions reopen, streaming services are putting increasing pressure on MVPDs, and sports betting is on the rise as a category, panelists told S&P's Kagan Media Summit. Core ads are “set up for a growth streak,” said Sinclair CEO Chris Ripley on Thursday. “Habits picked up during the pandemic are likely to have lasting effects on video consumption,” said Kagan's Deana Myers.

TV station ad revenue will increase 18.2% 2020-2022, driven by a projected $3.25 billion in political commercial spending, said S&P analyst Justin Nielson. During the height of the pandemic shutdown, TV core advertising was down 40% year over year -- twice as bad as during the 2008 recession. Ripley called the recovery “an amazing bounceback.” Ripley conceded local ads are tending to lag at the moment, and the shortage of chips needed for cars has hurt auto commercial sales.

Sinclair hasn’t started seeing 2022 political ads, but big midterm spending is expected. “What’s so great about political advertising, all the money raised is generally spent,” Ripley said. With large tech giants pulling back from running such marketing, there's more money to be spent on broadcast, Ripley said. The local TV share of political ad revenue will be $909.8 million in 2021 and grow to almost $3.25 billion in 2022, said Nielson. That’s a 7% increase from the comparable 2018.

Sports betting has been sequentially increasing as an ad category, doubling across consecutive quarters, said Ripley. Sinclair has partnered with Bally’s to increase the “gamification of sports” by combining viewing with gambling, Ripley said. FuboTV CEO David Gandler said sports betting turns sports viewing from a passive to an interactive experience. FuboTV isn’t seeking to compete with dedicated sports platforms such as FanDuel, he said. Including betting “isn’t about ruining people’s lives,” but “interactivity and fun,” Gandler said. A consumer’s sports betting choices can provide data for tailoring the viewing experience, Gandler said.

ATSC 3.0 will aid Sinclair’s focus, providing ultra low latency video for quick windows of in-game betting, Ripley said. He expects the broadcast industry to have 100% of U.S. markets covered with 3.0 by year-end 2022. It will “provide much better monetization of the over-the-air population,” Ripley said. Myers said 3.0 could potentially lead to growth for TV broadcasting, but the industry faces a consumer education challenge.

Sports content is likely to continue moving onto streaming services, said WarnerMedia Sales and Distribution Head-Partner Management Jennifer Mirgorod. Due to sports content's high costs, that shift is likely to be extremely expensive, said Tubi Head-Global Business Development Andrea Clarke Hall.

Broadcast mergers and acquisitions could pick up in the second half of 2021, said Nielson. Ripley said Sinclair has participated in some negotiations, but “nothing has borne fruit.” Consolidation is “a commercial inevitability” held back by outdated regulation, he said. Sinclair sees opportunity for consolidation in regional sports networks, Ripley said. Sinclair is “roughly half of that industry,” he noted.

Subscription streaming services are “training” consumers to access VOD, which likely exacerbates MVPD sub losses, Myers said. Streaming services generally cost less than MVPDs, but also largely aren’t profitable, which means they need huge scale, Myers said. That’s likely to lead to consolidation, she said, pointing to AT&T’s U-verse and Sony’s Vue as services that were “shuttered.” MVPD subscriber losses picked up again in Q1, Nielson said.

​​​​​​​Digital video ads are growing, Myers said. Free ad-supported streaming services -- called Fast channels -- such as IMDb TV are on the rise, she said. Companies that own rights to huge swaths of content operating their own streaming services have “made it difficult to acquire large vats of content,” said Myers. Content and the resources to acquire it are “critical,” said Mirgorod. “To get on platforms, you really have to stand out.”