Why TV is Becoming a Turn Off

Television used to be a key market for advertisers. It also used to be a powerful tool for political leaders to influence voters. If the recent US election has taught us anything, it’s that YouTube has caught up and taken over.

YouTube’s advertising revenue has yet to reach a ceiling in its ever-expanding growth. Alphabet recently claimed the company made $8.9 billion in quarterly revenue from YouTube ads alone. At this rate, YouTube ads revenue could match that of the entire broadcast advertising industry for 2024.

YouTube’s advertising revenue is about to hit a new peak, with $8.9 billion in Q3 revenue, the company has reported $25.7 billion for the year so far. This puts YouTube over $3 billion ahead of where it was this time last year.

This is in stark contrast to TV ads that are bottoming out at the same time. In 2023, the entire broadcast industry made $33.84 billion in ad revenue, whereas YouTube alone made $31.51 billion. Almost every major television company, from Warner Bros Discovery to Sky TV, saw significant advertising declines in 2023. Bottom line – as YouTube rises, television is falling.

US Elections and Trump’s Historic Win

Elon Musk says Trump’s podcast appearances made a ‘big difference’ in the US election, particularly Trump’s three hours conversation on America’s most-listened-to podcast, the Joe Rogan Experience, which helped in bringing him to victory.

After being criticised early in her candidacy for avoiding challenging interviews, Kamala Harris sat for several television interviews, including CBS’s 60 Minutes and Bret Baier on Fox News, a pro-Trump network where she was subjected to predictably hostile questions.

Trump held more interviews but generally chose friendlier environments, including Fox and Newsmax, where his views went largely unchallenged. He pulled out of an interview with 60 Minutes, which has been interviewing presidential candidates for more than 50 years, after objecting to the programme’s plans to factcheck him.

Shannon C McGregor, a journalism professor at the University of North Carolina, claimed that the podcast appearances gave voters a better insight into the candidates as people, rather than the sometimes staged and awkward format that regular television interviews typically offer.

“It gives listeners a better sense of what the candidates are like than the CNN interview with Kamala Harris and Tim Walz, especially for people who aren’t super interested in politics,” she said.

YouTube Origins and Trends

YouTube has now been around for nearly 20 years, headquartered in  San Bruno, California, founded by three former PayPal employees— Chad Hurley, Steve Chen and Jawed Karim – in February 2005. Google bought the site in November 2006 for US$1.65 billion, which has since become one of Google’s subsidiaries. Thanks to advances in technology, YouTube, first known for viral videos now attracts more viewers on TV’s than Netflix, Disney+ or Amazon Prime Video.

In my home in Gibraltar, I see YouTube as another channel. I regularly watch it to see local news content published by GBC, and whether there are any new interesting videos from my subscription channels.  For me, it’s clear that the TV I grew up watching, and the industry I have spent the past 30 years working in, is changing rapidly. Fewer people are tuning in on scheduled time slots to view content, because they know they can catch up with their favourite show later.

But television isn’t dead. Americans still watch a lot of television — more than 5 hours per day, on average, according to the consultancy Activate. But audiences have moved, embracing the now dominant streamers like Netflix and Amazon. Streaming has grown to represent around 40% of total TV viewing time, according to Nielsen. These streamers have ad-supported tiers, too, where consumers can pay a lower rate. But the Netflix ad-supported tier has 40 million global monthly active users, compared to the company’s 270 million total subscribers. Because of this declining audience, many ad buyers have decided to look elsewhere.

This leaves video advertisers in a difficult position. Linear TV audiences are on the decline, and their demographics are no longer appealing, yet streaming audiences are also not where they should be.

All that leaves is YouTube—and sure enough, its revenue is skyrocketing.

The Short and Long-Term Outlook

In advertising, the 18-49 demographic is often considered the prime age for viewers. YouTube sits perfectly in this market, with 25- to 34-year-olds being the largest age group on the platform. YouTube is also hugely popular with children, which again bodes well for its advertising horizon. This is in stark contrast to linear TV, where its audiences are getting older. The average age of BBC1 viewers is now 61. In the US, the average MSNBC viewer is 70.

YouTube’s audience grew massively during the pandemic, when people were stuck at home and willing to consume more content. I found myself suddenly watching like-minded individuals with their own YouTube channels posting content relative to myself, whether it was David Zaritsky’s The Bond Experience channel, discussing all latest things on the topic of James Bond, from location-spotting to Bond’s wardrobe, or finding hotel review from vloggers who are posting videos on locations we may wish to visit. This gives audiences a more insightful review than reading some text and looking at mobile phone snaps on Tripadvisor.

Since the pandemic, YouTube abandoned its ambitious plan to beat Hollywood at its own game. The video platform had tried to create the next Netflix, hiring former MTV executive, Susanne Daniels, who developed shows under the branding YouTube Originals, releasing comedies, dramas and a horror-themed reality show, “Scare PewDiePie,” which starred one of its biggest personalities. The content library grew to include a Taylor Swift concert and a Justin Bieber docuseries. But only one show became a hit: “Cobra Kai,” which was a sequel to the “Karate Kid” films. Overall, it wasn’t gaining traction, so, in early 2022, YouTube decided to pull the plug.

YouTube sensibly went back to basics and instead relied on the user-created content that had made it a household name. At that time, it looked like a major concession — a failure, even. But it turned out to be just a speed bump.

On YouTube, ordinary creators decide what to make and cover production costs. If a video racks up views and ad revenue, YouTube sends the creators 55 percent of that revenue. If a video flops, it doesn’t lose any money. The company says it has paid creators and partners $70 billion for content over the last three years — but always after it has made money, without having to take financial risks.

The decision to leave content decisions with creators was the most important lesson the company learned, Neal Mohan, YouTube’s chief executive, said in an interview. “Our creators are much better at predicting what our fans and audiences want,” he said. “This is television remade for a new generation.”

So far, it has struck a chord. Mr. Mohan said 150 million people in the United States look at YouTube on televisions each month, and they watch the same things that are popular on phones. More than 550,000 YouTube channels have at least 100,000 subscribers, according to Social Blade, which tracks the industry. Around 60,000 channels have at least 1 million subscribers.

YouTube is a worthwhile platform for brands to experiment and invest in, either as a place to publish content — entertainment or educational — or to advertise. Most YouTube users say they don’t like the ads there, and that there’s too many. But if YouTube users had to pick, more choose the ads on YouTube over the ads on traditional TV or streaming — especially among younger consumers.

YouTube Celebs: MrBeast

MrBeast, aka Jimmy Donaldson, a 26-year-old who lives in North Carolina, is YouTube’s biggest creator, with 300 million subscribers. Donaldson’s wildly ambitious videos — where he often gives away large amounts of money, or creates elaborate pranks — have been viewed more than 55 billion times. MrBeast generated $223 million in revenue last year, with $700 million projected for this year, according to an unsealed court document. And to young Americans, he’s about as big a celebrity as it gets.

Would you rather run into your favourite YouTube creator, or favourite Hollywood star at the supermarket? In a recent survey, more Gen. Z YouTube users said they’d rather run into their favourite YouTuber — the only generation to admit this.

Thanks to YouTube’s scale and recommendation feed, creators can build meaningful audiences, people with specific interests or similar aesthetics, around the world, and generate real streams of income.

What makes YouTube unique is that there are now two decades of evolution on its platform, showing content that could really only appear on YouTube, and largely wouldn’t be considered on mainstream broadcast channels like BBC and ITV, or services like HBO, Netflix or Amazon, because they don’t fit the traditional TV mould.

YouTube also has strong viewership totals among Black, Asian, Hispanic and Spanish-speaking households.

“It’s just so broad — that’s what’s driving its strength,” said Brian Fuhrer, Nielsen’s senior vice president of product strategy. “There’s something for every single demographic and every race and ethnicity, all the time.”

Some YouTube channels have made their content more cinematic, to look good on larger screens. Sometimes human beings aren’t even the intended audience when someone turns on YouTube. Erynn O’Neil, a 45-year-old private chef who fosters animals at her Massachusetts home, said she plays YouTube on a guest room TV for new cats and dogs while they are acclimating to their new surroundings. “It can be soothing”, she said. “I’ll search for ‘cat videos long,’” she said. “As long as it’s over three hours, I hit play.”

YouTube – The Future of Entertainment?

What makes the rise of MrBeast Jimmy Donaldson, and most other YouTube creators remarkable is that there are no gatekeeping studio execs to appoint them, greenlight their ideas, or the ability to cancel their shows. This is very significant for YouTube, which has no close competitor, other than perhaps TikTok (but that’s still very different). Sure, the very biggest YouTube stars can get TV or streaming deals. MrBeast recently signed one with Amazon earlier this year.

But most of the formats, topics, speech patterns, talent, and overall vibes of YouTube don’t seem like they’d feel appropriate or welcome on services like Netflix or Max, at least not currently.

If these trends continue — platform-native content, mostly platform-exclusive talent, that’s especially popular with young viewers — then YouTube should continue taking share, representing a greater portion of the future of entertainment, culture, and attention.

Can Traditional Broadcasters Survive?

Warner Bros Discovery recently announced a $9bn (£7bn) write-off in the value of its TV networks. This is a stark acknowledgment of the damage the streaming battle is inflicting on traditional broadcasters. This pushed the US entertainment group to a quarterly net loss of $10bn (£7.9bn) and sent shares sliding 12%, displaying how channels such as CNN and TLC can no longer rely on a captive cable subscription base.

The question is now whether companies such as WBD – home to TV and film content can build the scale and make significant profits from their streaming operations before the death of linear television delivered by cable, satellite or aerial.

“Traditional TV is dying, or at least in zombie mode,” says Alex Degroote, a media analyst. “It is being replaced by a combination of services such as short-form video players like YouTube and TikTok, and the top streamers such as Netflix. WBD’s $9bn impairment is a real hammer blow and will reverberate across all traditional media assets.”

The market value of WBD, home to assets including the Warner Bros film studio, HBO and CNN, has plunged almost 70% in the two years since the group was formed in a $40bn (£31.5bn) merger between Warner Media and Discovery intended to help both businesses survive the transition to a streaming future.

“Unfortunately, the stock performance is a clear indication that investors see little optimism that the tides may soon start to turn,” says Robert Fishman, senior analyst at Moffett Nathanson.

WBD’s chief executive, David Zaslav, who has considered breaking up the company but concluded that is not currently the best option, said the market was being hit by a “generational disruption” that requires traditional TV companies to take “bold, necessary steps”.

Across the pond, there are reasons why the BBC will shut down all of its channels and move everything online. As BBC CEO Tim Davy suggested, traditional broadcasting is going away in favour of the Internet. “The shutdown will happen and should happen over time, and we must actively plan for it,” he said, while mentioning that the transition will only be fully possible if the principle of global access is maintained.

The BBC management sees this as a necessity. There is an increase in international competition in streaming, and free-to-air and public broadcasters must change the way content is delivered to accommodate changing audience viewing habits.

A number of terrestrial television companies are also being taken over by mobile operators. Traditional TV is not supported by the government. Not only the BBC is facing this, but also ITV and Channel 4. Changing public funding priorities will result in the license fee being gradually replaced by 2028.

Tim Davey also said that the company planned to close offline channels and radio stations by 2030 and form a single offer via online broadcasting. BBC Four and CBBC will go online within two years. The BBC’s uniqueness lies in its universal service, reaching all of the UK population, even in places without internet access.

The Future?

Perhaps the BBC will create one application that will be easy to navigate and switch, for example, from TV programs and news to educational content. The BBC can become a central point of future media in the UK, maybe even abroad, since there is no large-scale digitally managed public media company in the world yet.

Comcast’s Sky sees streaming services as a promising platform. It connects its TV to Sky Glass using the NowTV service, so we can expect that for some time, such old technologies as SD, transmitted over DTT and DTH will still function.

ITV has replaced the ITV Hub with ITVX by introducing services and generating advertising and subscription revenue. A number of premieres will be launched on this channel before they are aired on linear networks. Carolyn McCall, CEO of ITV, believes that with the help of ITVX they will be able to grow in the streaming business, “fundamentally switching to digital technologies.” In addition, McCall believes that analysing audience browsing habits and aligning user content with advertiser needs is a good strategy.

There is still a way to go yet though. TV Hub and ITVX have 1.2 million subscribers, which is significantly less than Netflix (16 million subscribers in the UK).

Digital transition comes with one major caveat – there are millions of people who live in rural areas with no or poor internet access. The UK government has signed a contract with Elon Musk’s Starlink company to pilot broadband coverage in these areas. The UK’s national broadband network is worth $5.7 billion and includes a $120 million contract to build gigabit broadband connections for 60,000 rural homes and businesses in the north of the UK.

Richard Broughton, director at Ampere Analysis, said: “Legacy TV businesses are in decline but the shift is not so rapid that it can’t be managed. There are still a lot of broadcast TV viewers, they have the time to pivot to profitability in the streaming world.”

Customer engagement must become the top priority; engagement solves the retention issue. When apps and media players begin to combine aesthetically pleasing interfaces with decent functionality, make searching for relevant content easy, and have stronger recommendation engines, that is when more of the intended target audience will take notice.

People pay for simplicity and convenience. Additionally, broadcasters could consider partnering with technology and consumer electronics makers themselves to ease any issues that hinder and frustrate viewing.

TV’s comeback may also lie in the ability to tailor advertising. If you sign in to Google on your TV, and it can send you different ads than your neighbour, ones that are suited to your needs, this could be the way forward.