Broadcast TV will see an infusion in advertising dollars in 2022, primarily due to this year’s midterm elections. BIA estimates that total local advertising spending for political will hit $8.6 billion, with TV OTA (over the air) garnering 44% of these dollars. In all, BIA projects that local TV ad revenue will grow 28.4% to reach $21.37 billion.
That’s cause for happy broadcast TV sales leaders. But what happens after 2022’s political boost? That’s where the story becomes a little more foreboding. In a previous post, we discussed OTT/CTV as usurping OTA dollars. Other forms of digital could also eat into local TV profits. So, what does 2023 and beyond look like?
2023 Numbers Nosedive
Pew Research projects that local TV OTA revenue will reach $15.39 billion, significantly lower than this year. There’s a rebound in 2024, which is also a political year with the presidency at stake, at $18.76 billion. For 2025, the number decreases significantly to $15.49 billion.
These spikes and drops are reminiscent of a roller coaster. You can’t control the market regarding political ad spending or advertiser decisions to diversify their ad spend. So, how will you increase revenue without increasing inventory? That’s a question that likely keeps you up at night. Let’s look at some answers.
Making Budget for 2023
You know there’s going to be a contraction next year, so start planning now on what your budget needs to be and how you can meet it with these tips.
Cover the Spectrum of Advertising
As TV OTA revenue slips in 2023, digital advertising revenue soars. According to eMarketer, it will increase by 12.9% in 2023, 8.4% in 2024 and 7.5% in 2025. It dwarfs TV OTA numbers. That spells opportunity for you to be a one-stop shop for advertiser budgets.
If you can deliver OTA and digital (including OTT/CTV), everybody wins. You keep revenue growing holistically, and your advertisers will see better results from integrated campaigns. They’ll also be able to work with one advertising partner, which greatly simplifies their life.
Expand Your Customer Base
Another way to get more money for the same spots is to increase the competitiveness of it. You can do that by landing more local customers and tapping into new advertiser categories. It’s a delicate balance, as you don’t want to alienate long-time customers. However, it’s just the way of the market — more demand means higher costs.
Price High-Demand Spots at a Premium
You know from ratings what your top spots are — typically local news and live sports. But local news is your sweet spot. Its viewership is increasing, and consumers trust it much more than national news. Thus, you can sell these spots at a premium using the facts, resulting in increased rates without added inventory. Updating rates, however, shouldn’t be based on intuition but rather on data.
Lock In Advertisers Now at Similar Rates and More Volume
If you have loyal advertisers that aren’t likely to reduce their ad spend (consider the biggest TV OTA spender industries), start 2023 talks now. Let them know they can lock in their rates and expand their volume of ad time. If you can sell more spots at the same rate, you can cover some aspects of your budget. However, that’s just the starting point, and you’ll need to increase rates. You shouldn’t do that without any basis or qualifiers, though. Instead, you should leverage data.
The Key to Increasing Rates for OTA Ad Spots: Rate Optimization Based on Data
If you’re using manual or analog processes to manage rate cards, it’s ineffective and inefficient. Worse, you’re likely leaving dollars on the table. Even if you have rate managers and massive spreadsheets of formulas, such a process isn’t scalable or sustainable. What you need is a rate optimization platform that ingests data, including:
- Real-time avails from traffic systems
- Historical rate data
- Other demand factors
A dynamic pricing tool (or yield management) uses algorithms to analyze the data and deliver the rates to you and your team. You have the option to set floors, ceilings and discount tolerances. It’s proven to increase top-line OTA revenue by 5%. The approach considers demand and doesn’t require expanding inventory.