Paid Media Updates

Media Update: Roku Becomes Home of Formula E Racing, TV Upfront Budgets Down, and Brighter Consumer Outlook

By Tinuiti Innovation & Growth Team
Media Update header 7-5-2023

Key Highlights

  1. Streaming: The Roku Channel is taking a bold step into live sports, becoming the new home of Formula E racing.
  2. Linear: Game shows have proven their worth on broadcast television, broadly defying the decline of linear TV audiences.  
  3. Ad Economy: TV upfront budgets are down this year, which could result in a greater migration of ad dollars to streaming services. 
  4. Consumer Economy: Consumer spending was flat in May on an inflation adjusted basis, but consumers are feeling much better about the trajectory of the economy. 

Streaming

OTT viewership in Q2 was relatively flat, and the level of aggregate supply has remained quite steady over much of 2023.  

Ad-Supported OTT Video Impression Availability

Industry Notes (Video)

1. After a slump in viewership over the past few months, streaming rebounded to 36.4% of total TV usage in May. While a change in methodology to capture streaming usage more effectively contributed to the monthly uptick, about half of the 2.5% streaming increase reflected changes in viewing behavior. It’s worth noting that total TV usage declined by 4.4% from April​​, likely the result of seasonality. 

May 2023 Nielsen Gauge

In addition to the general growth in streaming share, there was a distinct surge in the viewership of free ad-supported television (FAST) services. The Roku Channel emerged as a prominent player, breaking the 1% ceiling needed to secure standalone coverage in The Gauge. The platform’s breakout performance in May underscores the expanding influence of these services. Currently, there are three FAST services — Pluto TV, Tubi TV, and Roku Channel — that are independently reported in The Gauge, each commanding usage comparable to that of Peacock and HBO Max. Collectively, these three services attracted more viewership than Amazon Prime Video, indicating a significant shift in audience preference towards FAST channels​​.  |  Nielsen

FASTs Share - Nielsen Gauge

2. Speaking of The Roku Channel, the service has inked a landmark deal to bring live sports to its platform with Formula E, the championship series for electric racing cars. This is a significant event for FAST platforms, which have traditionally lacked live sports content. Roku has secured rights to broadcast 11 out of the 16 races in the 2024 Formula E season. It’s important to note that Formula E will still be on its core channels, as five races will be aired live on CBS Television Network and simulcast on Paramount Plus, accessible via the Roku Sports Experience from January onwards.

As Formula E aims to expand its U.S. exposure and audience reach, the partnership with Roku is expected to increase discoverability and contribute to a significant rise in viewership – Formula E is currently tracking a 7% increase compared to last year’s full race schedule and global viewership was up 10% in the 21/22 season. Formula E owes much of its increased popularity to interest in Formula 1 racing, which exploded in the U.S. with the Netflix series Drive to Survive in 2019. Formula 1 viewership increased 28% in 2022 alone. It is hoped that Formula E will see a similar surge in viewership.

The deal will not only include the live broadcasts but also other Formula E content such as race previews, highlights, replays of all races, and the Unplugged Formula E docu-follow series​​. With the introduction of live sports onto its platform, Roku is poised to redefine the FAST landscape.  |  The Verge

3. It’s no secret that Warner Bros. Discovery is making major changes in its pursuit of profitability. The company cut budgets, shows, and staff to reach cost cutting goals and has re-thought the distribution of its content with the HBO Max/Discovery+ merger. It also made news when it announced it would license popular shows like Westworld to FAST platforms. Now, rumors are brewing that WBD is considering licensing content to its direct competitor, Netflix, in order to boost revenue.   

Historically, SVOD services like WBD have operated as “walled gardens,” keeping their original content exclusive to their own platforms. This strategy aims to attract and retain subscribers by offering exclusive content. However, this approach can limit the distribution of content and prevent the spreading of production costs over as many viewers as possible. The shift WBD is contemplating represents a move away from this walled garden approach.

On another front, WBD is reportedly preparing Max to host live news with CNN, a most ambitious move considering that the standalone CNN+ service was shuttered soon after launch because it failed to gain enough traction. To start, CNN will only be offered outside of the U.S., so as not to interfere with the network’s deals with DirecTV and Comcast. However, all signs indicate that WBD hopes to bring CNN to Max domestically. It is likely that we will see other streamers reconsider their distribution in the near future, as the decline of linear TV and increased competition in the streaming sector make it difficult to achieve profitability with the current models.  |  Media Post, Bloomberg

Linear Media

Sports viewership rose over the past two weeks as the NBA and NHL draft both scored all-time viewership records. Viewership was likely also boosted by the U.S. Open, which is discussed below. 

P2+ Audience, Selected Genres

Industry Notes

1. Linear TV audiences are shrinking – cable subscriptions have fallen to their lowest level since 2019 and streaming continues to increase its share. However, in this discussion the viewership of broadcast television is often overlooked. With the Nielsen’s Gauge, we can see that streaming’s rise has mostly come at the cost of cable viewership; as a share of total TV usage, cable has declined 8.4 share points while broadcast has only declined only 2.6 share points.

The Gauge - TV Usage Share

An unsuspecting success story in this is game shows, which cost relatively little to produce and attract millions of viewers each night. In a time where soap operas and day and night talk shows are declining, game show viewership has remained remarkably resilient. This is likely due to the fact that the audience is aged 60+, which coincides with linear TV’s older audience. Sony, the studio of Jeopardy! and Wheel of Fortune, recently hired Ryan Seacrest to host Wheel, a vote of confidence for the longevity of game shows. While linear audiences will continue to decline, it seems that game shows will be a staple on broadcast.  |  NYT 

2. The U.S. Open scored a surprising gain in viewership this year, averaging 3.4 million viewers across NBC, Peacock, and USA Network. This represents a 27% increase over last year, and the highest viewership for the four day tournament since 2019. As we’ve discussed with the PGA Tour/LIV Golf merger, PGA viewership this year has increased modestly over last year. While the future broadcast schedule(s) for these leagues is still unknown, the performance of the U.S. Open bodes well for the sport generally.  |  SMWSJ

1. TV upfront budgets are down this year, a shift that many ad buyers believe will accelerate the flow of dollars to streaming. eMarketer estimates that ad spending at the upfronts will fall by 3.4%, or $18.64 billion, as economic uncertainty and declining linear audiences continue to affect the space. While some portion of this decline is due to smaller advertising budgets overall, the increase of ad inventory in the streaming space is undoubtedly influencing budget allocation. With more inventory ending up in the scatter market, we could see prices come down, depending on demand in the second half of the year.  |  Ad Age

2. In a surprising turn of events, the demand side platform MediaMath is filing for Chapter 11 bankruptcy after being plagued by financial issues. Launched in 2007, MediaMath was one of the first DSPs and had a peak valuation of $1 billion in 2018. The company struggled to meet revenue and liquidity commitments to its private equity backers, owing between $100 and $500 million to 200+ creditors. MediaMath’s bankruptcy has created a vacuum in the space, which is already being filled by competitors like The Trade Desk, Viant, and Google.  |  Digiday

Consumer Economy

1. One of the indicators that we haven’t discussed recently is consumer confidence, as it has remained relatively unchanged in the first half of the year. June marked a change – consumer confidence reached its highest point since early 2022, as optimism regarding the current and near-future outlook improved. The University of Michigan’s Consumer Sentiment Index, another survey of consumer opinion, also improved.

US Consumer Confidence Jumps to Highest Since Early 2022

With these improvements, it’s important to note that these surveys of consumers’ feelings do not necessarily correlate with spending or consumer health. It is possible that consumer spending rose in June, but the latest data from the BEA shows that consumer spending rose only 0.1% in May, and was flat on an inflation-adjusted basis.

Consumer Spending, change from a month earlier

Similar data from the Bank of America Consumer Checkpoint report and McKinsey show that consumers are spending more cautiously, even if they feel better about the economy. As we all attempt to read the tea leaves and gauge the impact of the Fed’s interest rate hikes, the data from May and June indicate that consumers are still largely resilient in their spending, if pulling back just slightly.  |  Bloomberg, WSJ

2. As you are likely well aware, there was an acceleration in retirements during the pandemic due in part to fortuitous housing and stock market prices. However, according to a recent Fed paper based on census data, the number of excess retirements is trending downward in 2023 – older Americans have continued working in a tight labor market with solid wage growth (>4% YoY). Additionally, housing prices have fallen in recent months because of high interest rates and inflation, potentially reducing confidence in homes as a stable retirement asset.

Covid-Era Excess Retirements Have Slowed This Year - Latest estimates show 2.4 million excess retirements in April, down from a peak near 3 million in Dec 2022

The labor force participation rate of Americans aged 55+ is the subject of scrutiny because it is the only age group that has not yet recovered from the pandemic – and there are still 10.1 million available jobs. As the Fed considers the strength of the labor market when it sets interest rates, the participation of older Americans could have a meaningful impact on their decisions.  |  Bloomberg

Labor Force Participation Rate - 55+ years old

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