Why TV is still crushing digital video, in 5 charts

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Digital video is a growing market, attracting ever-higher media spends each year. But in what should come as a bit of good news for networks preparing upfronts pitches, digital is still nowhere close to the total consumption or aggregate ad revenue of traditional television — at least in 2015.

The so-called upfronts are the televisions industry’s big moment to pitch advertisers in advance of the coming season. They have plenty to shout about: The average U.S. adult will (somehow) spend 5 hours, 31 minutes watching video every day this year, according to new data from research firm eMarketer. That figure represents both TV viewing (4 hours, 15 minutes) and digital video consumption (1 hours, 16 minutes). The total is up slightly from last year, with a 13-minute increase in time spent with digital video more than offsetting a seven-minute drop on the TV side.

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“People are spending less time with that main TV screen but not by a lot,” said Paul Verna, a senior analyst at eMarketer. “As tech gets more sophisticated, and particularly as connected TVs achieve a higher penetration rate, I think the television [screen] is going to hold pretty steady in terms of the amount of time spent.”

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But ad dollars aren’t shifting to digital as fast as eyeballs. U.S. advertisers will pour $70.6 billion into television advertising this year, forecasts eMarketer. That will represent 40.2 percent of all major media ad spending in the U.S., but people will only spend 36.4 percent of their media time watching television.

In contrast, U.S. advertisers will allocate $7.8 billion to digital video ads, representing 4.4 percent of all 2015 media spending, though digital video viewership will account for close to 11 percent of all media time, according to the research firm.

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That disparity between marketers’ TV and digital video spend is partially inertia, but it also reflects their concerns around viewability, fraud and viewer attention in the digital space, according to Verna.

Time spent watching content through connected devices — which includes standalone boxes like Apple TV and Roku, game consoles and smart TVs — will remain the smallest portion of digital video viewership this year, clocking in below tablets, smartphones and desktop, eMarketer predicts. The average U.S. adult will watch just 13 minutes of video through connected devices each day this year.

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“I was a little surprised [at how low that figure is],” said Verna, “but many of those devices don’t have the penetration rate they will have. Particularly with connected TVs, we’re still at a low point in the curve, and that’s going to ramp fairly quickly.”

That “over-the-top” (OTT) viewing through digital devices is poised to swallow a significant portion of the overall TV ad spend in the coming years, according to research published earlier this month by The Diffusion Group. Diffusion expects 14.5 hours of weekly OTT video viewing by 2018, with $31.5 billion in ad revenue funneled toward the medium that year. But that doesn’t mean YouTube and Hulu will decimate Comcast and Time Warner Cable: Many of the top buyers and sellers of OTT inventory will be the entrenched players in the TV marketplace today, who intend to keep their dominant positions as viewers shift to the digital medium.

“If watching an ad and it’s showing up on TV, I don’t really care if it came in through my Roku box or my set-top box,” said Alan Wolk, senior analyst at The Diffusion Group. That unnecessary distinction between TV and digital “is one of the big things devaluing OTT inventory, as well as the lack of a standard measurement solution. A lot of this is predicated on Nielsen getting its act together [and launching its oft-delayed OTT measurement product].”

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Recent figures on actual media spend support these forecasts from eMarketer and The Diffusion Group. Combined advertising revenues for digital video platforms (such as YouTube, Hulu and Roku) and digital TV properties (such as ESPN.com, NBC.com and ABC.com) grew 12 percent in the first quarter of 2015, compared to the same period last year, according to Standard Media Index. (SMI measures 80 percent of total national U.S. agency spend directly from their booking systems, according to the company.) Meanwhile, TV ad bookings were down 6 percent in the first quarter compared to the prior year, though SMI attributes some of that relative weakness to the Sochi Olympics in Q1 2014.

Ultimately, “the bottom line is people are watching more and more video, regardless of content and platform,” said Verna.

Main image created by Eric Blattberg / Digiday