The TV, the main screen in the house, is rapidly becoming connected to the internet, opening a new front in the battle for people's attention

Tech players, pay-TV operators, and manufacturers are all aiming to control the user interface, ad delivery and data collection, leaving incumbent broadcaster interests less well represented

To protect their position, and the principles of public service broadcasting, broadcasters will have to work with each other at home and in Europe to leverage their content and social importance

We interviewed the biggest hitters in the UK television production sector, asking them about the current issues affecting their industry, such as consolidation, Peak TV, and Nations and Regions quotas

Most pertinent, however, was the production sector’s relationship with the new buyers—Netflix, Amazon, Apple et al.—and how their approach to them differed for each one, as well as traditional broadcasters when pitching, negotiating deals or producing programmes

With views anonymised for candour, this report is an honest representation of an industry where quality and volume are both at an all-time high, despite the challenge of change brought about by these new players

Linear TV's decline continued into 2018, with an overall drop of 3% across the first 12 weeks YOY. However, overall TV set usage remained flat at 4 hours/day, as time spent on unmatched activities—which includes Netflix, Amazon and YouTube—continues to rise.

Within the ever-shrinking pie of consolidated viewing to the TV set, share of viewing (SOV) to the ten largest channels remains broadly flat. Across the whole of 2017 and the start of 2018 the best performer has been ITV (main channel).

Several big-name digital channels are showing surprising signs of recent decline, including UKTV’s Drama and Viacom’s 5USA. It is too early to tell if these declines are a blip or a trend. However, they reflect stalling growth from the long tail of digital channels in aggregate. 

The market for addressable TV looks constrained despite its benefits, with Sky AdSmart taking less than 2% of overall TV ad revenues. Meanwhile, online video revenues for Google, Facebook and others have surged dramatically

Agencies are seemingly enraptured by online video – a highly profitable medium to buy – despite concerns about a lack of effectiveness, safety and transparency 

For broadcasters to compete, better radical collaborative action is needed, including industry-wide adoption of AdSmart, and overhauling the trading agreements which hinder its take-up

We forecast UK display adspend to grow by 3.1% in 2018 (<1% in nominal terms), with TV roughly steady, newspaper decline slowing and digital growth slowing a little

Households are facing an income squeeze and the ability of debt and credit to carry them over is reaching its sensible limit. Brexit-related uncertainties remain the single strongest drag on business investment, dampening ad spend

TV spend is the £5bn question. While live viewing continues to decline, TV delivers against different marketing objectives from precisely targeted online inventory, and rapid broadcaster VOD growth will help hold TV spend steady

Even with the decline in linear television viewing, online video remains a small component of total video consumption. The growth area is unsurprisingly SVOD; subscription video now makes up about two thirds of the UK's digital video spend.

Netflix is moving from an aggregator of content to a "channel" in its own right, increasing proportionate spend on original programming, something that the public service broadcasters are unable to do for differing reasons. Amazon had a tough 2017 for video, and are still struggling to create a hit.

New Nielsen audience data suggests that the long-term "library value" of Netflix's originals may be overstated, while the BBC's iPlayer continues to be hampered by not really having a library at all.

The amount and distribution by time of day of TV viewing, as well as the PSB group viewing shares have remained notably stable over the last ten years in which the major shift from analogue to digital transmissions has occurred and timeshift/catch-up viewing has become commonplace.

The topline trends nevertheless mask significant age-related under-currents of change, which have seen a large loss of younger audiences and sharply ageing profiles for BBC1, BBC2 and ITV.

Whilst the more youth-oriented Channel 4 has avoided the ageing profile effect, it faces its own challenge of averting audience decline, as it finds itself at the sharp end of change among younger adults and faces declining support among older viewers.

Channel 4 enjoyed a bumper year in 2012 with regard to delivering its public service remit, epitomised by the London Paralympics

Public service successes notwithstanding, the continuing decline in main Channel 4 audience share post digital switchover is not being fully compensated commercially by large gains across the rest of the Channel 4 portfolio

Overall, we expect group revenues to remain quite stable in 2013 and 2014, but current record levels of investment in programme content origination have yet to bear fruit in terms of strong returning series

The development of the Digital Britain infrastructure, introduction of tablets, increasing connectivity of TV sets and launch of on demand OTT services over the internet have greatly intensified interest in connected viewing and its impact on the traditional broadcast model No single source of audience measurement for viewing of long- and short- form video content across all screens yet exists, though current market data suggest that connected viewing occupies a c. 8.5% share of total viewing across all screens By 2020, we project the connected viewing share of total viewing across all screens will reach 20%, with tablets being the primary drivers of growth, in part incremental and in part substitutional to viewing to the TV set, where we expect the connected viewing share to remain under 5%