Viewers Turn Off the TV … And TV Ad Prices Go Up?

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For the first time in two decades, the number of U.S. households with at least one TV has declined. So why would the rates charged to TV advertisers be rising?

BusinessWeek rounds up the latest data pointing out that more and more Americans are turning off the TV. They’re joining the cord-cutting trend in especially large numbers, with some 580,000 customers canceling pay TV service in the second quarter of 2011—the biggest decline ever.

They’ve also been more likely to get rid of or go without TV entirely: The number of U.S. households with a TV is estimated to have dropped 1%. That doesn’t sound like much; 114.7 million households still contain TVs, after all. But it’s the first such drop to have occurred since 1990.

What’s more, traditional TV viewership has declined substantially among young adults, which obviously doesn’t bode well for the future of TV. Some of the sharpest drops in the number of households with TV are in college towns teeming with students and post-grads such as Boston, Madison, and Austin. It’s these young people who have been particularly likely to cut their monthly cable bill—not only because the job market’s awful and they need to trim expenses, but because they’re now apt to get a fair share of their entertainment for free or cheap online.

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All of which sounds pretty horrible for the folks in the TV business.

And yet, as the Wall Street Journal reports, the price charged to place many ads on TV has gone up by roughly 17% since last season—basically because advertisers are more eager than ever to reach whatever eyeballs that still remain glued to the tube. This goes especially when advertisers are trying to get their message out to young people, presumably to create the next generation of loyal customers:

At the big broadcast TV networks, the number of 18-to-49-year-olds watching commercials last season was 17% below the number that watched on the four biggest networks for the 2007-2008 TV season. That reduces the available inventory of ad impressions to sell and has helped drive up the price per viewer on broadcast TV.

But if the number of viewers declines steeply, overall revenues generated by TV ads will shrink, even if advertisers are paying somewhat higher prices per viewer. To keep the TV money-making engine purring, programmers will have to figure out ways to entice audiences to stick with traditional television, which is increasingly difficult to do in an era when there’s so much else to watch, do, and click on—and when so many of those other options are not only cheap or free, but mostly ad-free as well.

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Brad Tuttle is a reporter at TIME. Find him on Twitter at @bradrtuttle. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.

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