Sky and C4 suffer biggest slumps in young commercial impacts

The number of linear TV ads seen by 16- to 34-year-old viewers has fallen by a fifth compared with a year ago.

'SAS: Who Dares Wins' aired on Channel 4 during the period
'SAS: Who Dares Wins' aired on Channel 4 during the period

Young audiences saw a fifth fewer TV ads in the first two months of this year compared with January and February 2018, with channels sold by Channel 4 and Sky Media showing the biggest declines.

Media agency figures for 1 January to 28 February show Sky Media’s commercial impacts – defined as one member of the target audience watching one ad – among 16- to 34-year-olds dropped by 23% year on year. Sky Media sells ads for third parties, such as Channel 5 owner Viacom, as well as its own channels.

The young audience decline is understood to have put considerable pressure on Sky Media's ability to deliver its group-wide deals with agencies.

On the main Channel 4 channel, 16-34 impacts fell 23%, while on the digital channels it sells, which include E4, UKTV’s portfolio and BT Sport, they slumped 25%.

Media agency calculations suggest 16-34 impacts only declined by 7% year on year on the core ITV channel over the same period, against a market down 21%. On ITV's digital channels, such as ITV2 – the home of Love Island – they declined by 15% in the same period.

"The most interesting thing for me is the performance of both Sky and Channel 4 compared with that of ITV," one senior media trader, who asked not to be named, said. 

"The broad narrative is that Netflix et al are taking a chunk out of TV viewing, and there is some truth in that, but what’s interesting is that they’re clearly taking a bigger chunk out of Sky and Channel 4 than they are out of ITV."

ITV’s push into subscription video-on-demand through a tie-up with the BBC could be motivated by this, the buyer said, as SVOD doesn’t appear to cannibalise its traditional TV performance as much as other broadcasters.

One media agency source suggested Sky’s linear audiences had been hit by the layout of Sky Q – which promotes on-demand content on its home page – and the decision to make the entire series of some shows available on demand at the same time. Some series were more popular than expected and so Sky Media had undersold the on-demand advertising slots around them.

It is understood that Sky's ambition is to extend Sky Q to all homes. Some media agencies are concerned about the impact this will have on Sky's linear viewing in the longer term.

A source close to Sky Media accepted Sky customers’ enthusiasm for bingeing on boxsets had taken them by surprise but dismissed the link to linear audience declines, citing the relatively small number of shows available. Sky Media will be better prepared when other shows are made available as boxsets.

Paul Richards, executive director, Dowgate Capital, said: "If you look at it as a whole, Sky generates its revenue from consumer subscriptions. Advertising is under 7% of revenue but, saying that, it's a high-margin revenue stream. If you look at investment in AdSmart you do see a role for advertising [in Sky's future] but it's all about the customer experience."

Sky Media’s audiences can under-perform in January and February when compared with the rest of the year. One of the reasons is the FA Cup, which is broadcast on the BBC and BT Sport and is scheduled in place of Premier League games. Celebrity Big Brother, which ran on Channel 5 in January 2018, has been cancelled.

Channel 4’s schedule in the first two months of 2019 was weighed towards public service broadcasting versus the same period in 2018, a source closer to the broadcaster said. Sky also changed the positions of Channel 4’s channels in April last year, making them less prominent and affecting the year-on-year comparisons.

Despite this, Channel 4’s share of young audiences in the period 1 January to 12 February is understood to have held relatively flat. More recently, Derry Girls, Leaving Neverland and Celebrity Great British Bake Off have delivered decent overnight audiences (1.8 million, 2.1 million and 3.1 million viewers respectively).

In January Ebiquity predicted the current rate of decline in audiences among 16-34s would spread to older viewers, push up prices and stop TV advertising being cost effective in the next five years. 

The report followed Bank of America Merrill Lynch analysts warning that TV broadcasters were underestimating the declines in audiences and the threat from digital video services, in a note that prompted ITV shares to drop by around 6%.

However, research by commercial marketing body Thinkbox showed that when linear and broadcast video-on-demand are combined, reach among 16-34s was roughly the same in 2017 as it was in 2007. Brands can achieve as cost-effective a reach as 10 years ago by planning across linear TV and broadcast video-on-demand, Thinkbox has demonstrated.