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Slow TV ad market is to blame for rising programming costs

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TV channels raise fees on slow TV ad market

In Part 6 of this series, we discussed how rising programming costs are actually creating a fight between the broadcasters and cable and satellite TV companies. We described how DISH Network Corp. (DISH) had found itself in a tussle with Comcast Corporation (CMCSA), Time Warner, Inc. (TWX), and CBS Corporation (CBS). The issue here is that the TV ad market has grown soft. That’s the main reason why TV channels are raising subscription fees. TV ads and programming fees are the major source of revenue for these companies.

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The digital advertising market will experience fast growth

The TV ad market is indeed undergoing a structural decline. According to a report from Business Insider’s Intelligence, and as the chart above shows, the US TV ad market will fall at a CAGR (compound annual growth rate) of 1.8% between 2013 and 2018.

On the other hand, the overall digital ad market will experience a CAGR of 14% during the same time period. Within the overall digital ad market, mobile, social media, and video will experience even stronger growth. Google Inc. (GOOG)(GOOGL) and Facebook, Inc. (FB) are both set to leverage the digital ad market growth. For more on this topic, read Why Google continues to dominate the online advertising market.

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