The forecast includes a slight revised total growth number, up to 6.1% from 5.9%. Morgan Stanley’s team, headed by analyst Benjamin Swinburne, notes cyclical lift this year from forces like mid-term elections, the Winter Olympics and the World Cup. Its report also says that Facebook and Google are driving 95% of online ad growth, using their mammoth scale to grow market share year over year.
The TV upfront for 2018-19 will see pricing grow 9% to 10%, but double-digit declines for ratings guarantees will leave the overall upfront in red figures, the report predicts. “While efforts to reduce advertising inventory, most notably at NBC, could drive additional scarcity, we estimate higher upfront units sold vs. prior year (even excluding the launch of CW’s Sunday primetime block), as the mix likely shifts from scatter to upfront in the solid pricing environment,” Swinburne writes. “In contrast to primetime entertainment, sports may have seen such an increase in supply that pricing is less robust, notably for the NFL.”
Given these challenges, Morgan Stanley said the viability of TV in a changing landscape depends on the medium’s ability to monetize OTT and fully implement addressable ads. (AT&T has said its Time Warner acquisition is largely based on the potential of addressable ads, which target individual behavior rather than simple demographics.)
“In the context of falling primetime TV ratings (down 30-40% compared to five years ago on a C3 PT18-49 basis), the modest declines seen in underlying TV advertising are a testament to TV’s audience reach and pricing power,” Swinburne wrote. “Historically, the growth in OTT consumption was led predominantly by adoption of ad-free platforms like Netflix and Amazon Prime Video, but appetite for ad-supported premium TV content is evidenced by Hulu (over $1B in advertising annually) and Roku (more than doubling its ad sales off a small base to $160M in 2017).”