With linear TV ratings dropping another 9 percent in the second quarter, major cable networks now appear to be stuffing as many as 10 percent more commercials into every hour of programming to sustain their margins.
According to Sanford C. Bernstein analyst Todd Juenger, AMC Networks led all crammers, pushing in 10 percent more spots onto platforms including its AMC flagship channel. Viacom (up 7 percent) and A+E Networks (up 5 percent) also significantly increased their ad loads in the quarter.
"The continued ad stuffing is an obvious and unsustainable (some would say 'desperate') action by the networks to prop up ad revenue in the face of declining audiences," Juenger wrote in a note to media investors. "Not only can this not be sustained going forward, it further contributes to the audience declines, making SVOD that much more preferable for viewers made numb by the absurd amount of ads (as well as decreasing the efficacy of the advertising that is still seen)."
According to Juenger's report, C3 audience ratings -- which cover viewing of commercials up to three days after their initially airing -- were down 9 percent across the board in prime-time, excluding kids programming, in the second quarter.
That's especially bad news for linear programmers, since the comparable year-ago time period -- the second quarter of 2014 -- saw a 7 percent C3 ratings decline. "This confirms for us that the declines that began last year are not 'easy comps.' They are the beginning of a structural decline that continues," Juenger also wrote.
Kids programmers are hurting the worst. C3 ratings for the overall kids segment were down 14 percent in the second quarter, with Nickelodeon's 29 percent cratering leading the category.
For the networks, it's a simple matter of watering down the product to meet commitments to advertisers. Programmers are loath to give back money to advertisers after promising to reach a given number of impressions. With fewer viewers available per hour, their short-term solution is more advertising.
This, of course, instigates a self-perpetuating cycle, with the increased commercial loads turning off viewers, who have commercial-free recourse in the form of SVOD services and other over-the-top programming options.
Update: MoffettNathanson retracts Q4 commercial volume report
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