Guy Stephens

VP / Strategic Planning

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The Internet is slowly but surely killing TV

For years, TV executives and industry analysts had scoffed at predictions of doom. But now, with declining ratings and ad revenues, they are in greater agreement that the Web is slowly but surely eating traditional TV.

In new research, long-time media analyst Michael Nathanson of Moffett Nathanson Research wrote to investment clients that the growth of online ads are definitely coming at the expense of traditional TV and other media. He forecasts ad spending on TV will decrease by about 3 percent each year through 2020.

And after several conversations with ad executives, Nathanson said he now predicts that by 2017, online advertising led by Google and Facebook, will surpass spending on TV ads. There is an increasing belief among advertisers that selling their messages on TV is a blunt instrument compared to the precision of online targeted ads.

Over the next five years, online advertising will increase each year by around 12 percent, with most ads placed against online video and on social networks. He expects total U.S. digital advertising will rise to $100.6 billion in 2020 from $49.5 billion in 2014.

"It is clear that TV is losing and will continue to lose share to digital media," he wrote in a research note Tuesday.

That assumption is based largely on declining viewership. In August, cable TV ratings were down 9 percent. Those ratings were particularly concerning amid increased "cord cutting" of cable TV service. In the second quarter, 566,000 cable and satellite subscribers canceled their service.

[You're paying a shocking amount to rent a cable box]

Ratings for viewers age 18 to 49 are expected to drop by 5.5 to 6.5 percent each year for the next five years. The greatest declines in traditional TV viewers are among 18 to 24, a highly mobile phone-centric cohort. These young consumers likely have never subscribed to a cable TV package — some call them "cord nevers" — and have increased their viewing of digital media by 170 percent between 2009 and 2014 but decreased their viewing of traditional TV by 21 percent in those five years, Nathanson wrote.

Indeed, even older adults are sharply increasing their consumption of digital media even as they continue to watch traditional TV. Consumers 50 years and older are most avid viewers of traditional TV and they are simply adding more hours to their week with digital consumption too.

"Not only is digital claiming the youngest cohorts, it is also claiming a disproportionate share of the most affluent and educated consumers as well which leaves non-digital media for the poorer and older segments of the population," Nathanson wrote.

But the death of traditional TV won’t come quickly. In all, Nathanson expects online media to make up 56 percent of all media consumption by 2020, up from 44 percent in 2014. Traditional TV will make up 30 percent of all media consumption by 2020 compared to 37 percent today.

[In cable, its survival of the fittest as channels drop from the dial]

And sports will be TV’s best defense. CBS, ESPN, Fox and Time Warner have all signed long-term contracts with the NFL, NBA and NCAA.

The most vulnerable will be the "long tail" cable networks, those middling networks that don’t get high ratings but were added to big cable bundles as experiments and to fill niche interests.

Earlier this week, Verizon informed customers it had dropped the fishing and hunting Sportsman Channel from its lineup for FiOs TV customers citing modest interest and a need to reduce its high costs for programming. Last March, it dropped the Weather Channel for similar reasons.

6D9C92E6-DDE7-4FA5-54A8C6952E7ACED9_def.jpg&w=180&h=180Cecilia Kang is a senior technology correspondent for The Washington Post.

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About Guy

Someone has to be the numbers guy in the group, and in our case it’s Guy. In a verbally inclined agency of big personalities, Guy is the one at the end of the table who doesn’t speak until he has something to say. But when he does, it’s always smart, usually right on the money, and often related to the need for better metrics, validation, proof, research, benchmarking and measurement. Guy manages the strategic planning function of the agency that helps deliver clients the insights needed to execute the right campaign, in the right way, and at the right time. He has a degree in advertising as well as a master's degree in marketing communication & information technology from Florida State University. He has also spent time as an adjunct professor at the Rollins/Crummer Graduate School of Business, teaching integrated marketing communication to professional MBA students.