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Why TV still reigns supreme for advertisers

Every year millions of pixels are wasted on op-eds predicting the end of television, and every year the exorbitant fees for a 30-second Super Bowl advertising slot spike to even more stratospheric, bewildering heights. Billionaire pundit Mark Cuban maintains that the future of television is television and we are a long, long way from another device supplanting the alleged relic as advertisers' favourite medium He's right.

The $3.8-million (U.S.) cost for 30 seconds of Super Bowl XLVII ad space is insane only on the surface. For half a minute, an advertiser is more or less guaranteed the attention of 111 million viewers. Mr. Cuban explains why this is a much better deal than online advertising:

"The views of a video on YouTube includes all the showings over an extended period of time. The ratings for Shark Tank or any TV show all happened during the one hour the show was on the air. Which is exactly why TV is still a much more valuable advertising medium. Would you rather have your ad seen by the audience all within one hour, or over some unknown extended period ? … No matter what happens with wired TVs or mobile devices, TV gives you an audience right now."

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Consumer behaviour also supports the continuing superiority of television over online viewing. The declining fortunes of Dell Inc., Intel Corp., and Microsoft Corp. highlight the steady substitution of mobile technology for desktop computers. At the same time, the biggest recent upgrade cycle in the electronics industry has been high-definition televisions, which have generated outsized profits for Corning Inc., Sharp Corp. and Samsung Electronics Co. Ltd., among many others.

None of this is to suggest that television will rescale the heights of 1983, when 60.2 per cent of American households tuned in to watch the final episode of M*A*S*H*. The entertainment audience will remain fragmented, and the struggle to attract the most-coveted younger audiences will intensify. As Macleans recently noted, networks are now in the bizarre position of having to cancel their most popular shows because only the older demographics are watching.

But unlike the music industry, crushed by the Napster/iTunes double tap, there are numerous signs that television has successfully adapted to technological change. In terms of artistic quality, the past few years have been arguably the best in the industry's history. The Wire, The Sopranos, Breaking Bad and Homeland are uniformly listed by critics among the best shows ever made. The audiences are smaller, but content providers have developed new profit strategies, most notably the extortion of cable networks. As Mr. Cuban notes, video-on-demand usage on televisions is growing at a faster rate than YouTube viewers.

The Super Bowl is an annual reminder that, in terms of reaching the maximum amount of people in the shortest period of time, television's dominance over other media remains unchallenged. Despite all the dreck, the very best content – and the advertising dollars – will be found on television for the foreseeable future.

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About the Author
Market Strategist

Scott Barlow is The Globe's in-house market strategist. He is a 20-year veteran of Canadian investment banks, including Merrill Lynch Canada, CIBC Wood Gundy and Macquarie Private Wealth (MPW). He was a highly ranked mutual fund analyst for 10 years and then, most recently, the head of a financial adviser support team at MPW. More


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