Advertisers aren’t moving to streaming TV quickly

There are more cord-cutters than traditional TV subscribers. So why are advertisers spending more on linear TV?

Advertisers have historically been eager to follow the eyeballs when it comes to marketing decisions—whether it’s the highest-rated TV shows or the most viral platform—brands typically want to be where they can reach the largest audience. And yet, marketers remain skeptical of truly embracing the shift of viewers to streaming TV.

While 81% of U.S. households that have Wi-Fi stream TV, according to new Comscore research, during this year’s upfront ad haggle media buyers said that even though investment in streaming grew, it still doesn’t contend with the reach of linear TV.

From May 2022 to May 2023, U.S. households’ total connected TV consumption grew 20% from 9.6 billion hours to 11.5 billion, according to recent data from Comscore. The report found that more than 50% of TV viewership has been on CTV versus linear consistently throughout 2023, and that the percentage of cord-cutters (44%) has surpassed the number of traditional TV subscribers (41%) for the first time.

While consumers have jumped to streaming en masse, the transition for advertisers is less simple. One media agency executive told Ad Age that clients allocated 60% of their spend to linear and 40% to CTV on average during this year’s upfront. But the price of sports is becoming a major factor in why more money is still being allocated to linear, the agency executive said. A second agency executive said its clients averaged 55% linear and 45% streaming and similarly pointed to the pricing of live sports as linear’s strongest hold on ad budgets, so much so, that “some clients cut linear altogether outside of sports.”

The second agency executive also said the gap will continue to close as more digital platforms claim major sporting league rights, and that the agency “fully expects more dollars to shift to streaming come the second quarter of ’24 when entertainment due to the SAG-AFTRA strike begins to affect scheduled programming on network/cable.”

An end date is still unknown in the ongoing negotiations between the unions representing Hollywood writers and actors and the organization representing major studios. The potential impact of halted productions on networks’ content slates continues to worry advertisers. Over the past months, fall primetime schedules have been reshuffled multiple times, with most largely over-indexing on reality and game shows. While that could mute demand for linear ad inventory, most buyers said it was less of a concern in the realm of streaming, where a large volume of viewing is for licensed or library series, such as the recent “Suits” resurgence. The show, which aired from 2011-2019 on USA, was recently added to Netflix. Nielsen reported last week it had racked up 20 billion viewing minutes over six weeks.

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Another reason advertiser adoption of streaming is behind the pace of consumption is that consumers are not necessarily watching on ad-supported tiers of these platforms. The Comscore survey found that of the top six streamers, over half have less than a quarter of subscribers on their ad tiers. In large part, Netflix, Disney+ and Max viewers are ad-free, while Amazon’s Prime Video doesn’t have an ad tier. However, Hulu’s subscribers are reportedly 68% ad-supported and YouTube is 82% ad-supported.

While NBCUniversal and Paramount’s streamers fall outside of Comscore’s top six, NBCU’s Peacock shows 76% of its subscribers pay for its ad tier and 58% of Paramount+ users subscribe to its ad tier. Overall, Comscore found new subscribers are choosing ad-supported tiers at a larger rate (17%) than ad-free (9%), compared to last year.

A third media buyer said this year’s upfront was notable not only for clients continuing to shift budgets to streaming, but also for the growth of legacy TV companies’ streamers compared to digital-only platforms such as Roku, Amazon or Google. The buyer said that in past years, clients looking to up digital video investments would have been better off moving money to YouTube or Roku while the streamers owned by NBCU, Paramount or Warner Bros. Discovery, among others, were mostly incremental to their parent companies’ linear sales.

“I’ve heard some talk that the big winners [in streaming] are the digital-first companies. In reality, a big amount of volume now can sit with the legacy broadcast companies’ [streamers],” said the buyer. Over the past year, platforms such as Peacock, Max and Paramount+ have “upped their game” for being able to handle higher volumes of advertising, according to the buyer, which will increasingly become competition for the big tech platforms. Now, they said a client interested in digital video advertising doesn’t “necessarily always have to shift out of a partner completely because they’re linear,” but can reorganize the allocation of dollars within one of those partners.

A fourth buyer said that although streaming continues to grow, it isn’t a replacement for primetime on linear. While all of their clients upped their streaming investments, they said adding streaming to deals helped strike a better price for competitive linear assets such as live sports and news, particularly as the Hollywood strikes have largely pulled scripted series out of networks’ fall schedules.

“In this marketplace, the deals were cut in a really great way if you added more streaming than you had last year,” said the fourth buyer. “Volume was the name of the game no matter what, but the more streaming you have, the better deals you’re going to cut, and by deals I mean rollbacks. That definitely is an initiator for some people who have not necessarily pushed towards streaming.”

A fifth buyer said the streaming ecosystem is still too fragmented to fully take advantage of its large audience. Comscore’s research found that the average household now streams on six different services, including free ad-supported platforms.

“What's the amount of subscriptions that a person is willing to pay for?” said the fifth buyer. “In my opinion, Netflix is one of them. While they’re close to 2 million AVOD subscribers in the U.S., they’re generally paid for as an ad-free experience. What’s going to be on top of it? That’s where the war has to be won.”

The fourth buyer said free ad-supported streaming, or FAST, is a particular point of interest among clients’ media mixes. Comscore’s data found audiences on the Roku channel and Paramount’s Pluto TV grew 27% and 28%, respectively, over the past 15 months, while Fox’s Tubi audience grew 48% and Amazon’s FreeVee saw its audience jump 55% over the same period. FAST also presents an opportunity to reach diverse audiences, according to Comscore, as Hispanic audiences were found to consume twice as much FAST content, up 81% year-over-year.

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“Investing in FAST channels is a better bet … it’s all licensed content, and people just want to see more of what they like,” said the fourth buyer. “And if they can do it for free, that’s good. [FAST] gives us more scale, gives us more incremental reach and gives us the opportunity to be strike-proof.”

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Parker Herren is Ad Age’s TV reporter. He was previously a freelance journalist and podcaster covering pop culture and entertainment as well as a Pilates instructor and a professional dancer. His passions include cats, the “Scream” franchise and Halloween costumes.