Video entertainment brands' adspend growth to stall after 2020 pandemic surge

Online video platforms will have less capacity to raise budgets after spending heavily in 2020, Zenith forecasts.

TikTok: online video brands have increased budgets (Getty Images)
TikTok: online video brands have increased budgets (Getty Images)

Video entertainment brands' adspend is forecast to plateau next year across key international markets after a pandemic-fuelled surge in 2020, a new report by Zenith has found.

The Publicis Groupe agency forecasts advertising by brands such as YouTube, Netflix and Amazon Prime Video to shrink by just 0.2% in 2020 across 10 key markets this year, including the UK. This will significantly outperform the wider ad market, which will drop by 8.7% across these same markets, according to the Business Intelligence – Video Entertainment report.

However, video entertainment is expected to underperform over the next two years, with no growth in 2021 and 1.3% growth in 2022. This is because online video platforms will have less capacity to raise budgets after spending heavily in 2020 and traditional TV broadcasters will be “weighed down by shrinking revenues from TV advertising and pay-TV subscriptions”.  

Zenith expects video entertainment adspend to be 1.2% higher in 2022 than it was in 2019, while overall advertising will still be 0.6% below its 2019 peak. 

The resilience of video entertainment adspend in a year of pandemic and recession is the result of increased demand from consumers, increased supply of content and intense competition among video brands for viewers, the report added. 

In the UK, adspend by online video platforms increased by 79% last year, while adspend by traditional TV grew 34%, the report found. In the UK and the US, TV broadcasters and pay-TV platforms pushed up spending temporarily in response to their new competition, but Zenith forecasts that this will prove unsustainable in the face of ongoing decline in their revenues, both Covid-19-related and structural. 

Online video platforms such as YouTube and TikTok have continued to raise their budgets as they seek to exploit the current window of opportunity to build a loyal customer base. Zenith's findings show that each platform is spending heavily to ensure that they are top of mind while consumers consider which to commit to for the long term.

Video entertainment brands also spend more on digital advertising, out-of-home and cinema than the average brand, the report added, meaning they have been forced to compensate for lost audiences from empty cities and closed cinemas. This explains why digital spend will account for 57% of total video entertainment spend this year, up from 53% last year. 

The US is the only market where video entertainment adspend is expected to continue to decline after 2020, as rising online revenues fail to compensate for the ongoing declines in TV advertising and pay-TV subscriptions, therefore reducing available ad budgets. 

Jon Stevens, managing director at Zenith UK, said: “With cinemas, theatres, sporting events and gigs cancelled, closed or at reduced capacity, audiences still want to be entertained, and they have turned to TV, subscription video-on-demand and online video more than ever. 

“But with an extensive array of choice for consumers and new players to the market, most notably Disney+, brands and platforms in the category need to continue to invest to win (and keep) audiences.”

The markets included in the survey are Australia, Canada, Germany, India, Italy, Russia, Spain, Switzerland, the UK and the US, which collectively account for 57% of all global adspend.

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