Do Key Category Declines Reflect Economic Malaise or is it More?

SMI recently released its second quarter ad spend data, and while the overall performance story has been relatively consistent month to month (TV is declining, digital is up and overall market is relatively flat), digging into performance at the ad category level shines a much more nuanced and compelling light.

The most interesting shift from this past quarter came from two of the biggest and most important categories to television networks, retail and entertainment (i.e. movie advertising), which saw substantial year-over-year drops in Q2.

Retail ad spending was down 16% in Q2’15 from the year prior, and entertainment softened even more – falling a whopping 25% in the quarter. Of course, what makes retail and entertainment advertising trends so telling is not just that they represent such a large piece of the advertising pie, but also that these categories in particular are so representative of discretionary consumer spending and a sign of what is going on in the broader economy. In the case of entertainment advertising, it is also reflective of shifting strategies that enable marketers to better engage with their target audiences.

Whether you read the Journal or watch CNBC, it’s clear that the market is waiting for retail sales to rebound – and it is just not happening. As a result, retail advertisers are holding back their TV spend in a big way. Yes, retail ad spending coming from upfront dollars was down 10% in the quarter, but the fact that retail spending in the more opportunistic scatter marketplace was down 40% clearly shows that retail marketers are not willing to chase consumers that they see are not spending money (at least via the mass reach vehicle of traditional television).

Entertainment ad spending – primarily those dollars spent promoting new film releases – is in a bit of a different place than retail. Given that entertainment spend coming from upfront dollars is down 27% YoY in the second quarter, this would indicate that movie studios are making much more calculated decisions (far in advance) to siphon dollars out of TV and into various digital marketing platforms. TV scatter spending from the movie studios is down as well (by 18%), so this is clearly a sign that the tides are changing for the movie industry, and not simply just a sign of weak consumer spending.

Speaking of digital, as you may have already guessed, both retail and entertainment advertisers moved dollars from TV into digital in droves – with digital spend from retail brands up 14% in Q2, and entertainment up 22%. Bottom line: there’s a lot going on right now – both on the economic and strategic front – and the results the market is seeing with these two critical ad categories certainly has TV ad sales executives fighting hard to reverse these trends. Time will tell if they can do it.