By Bhaskar Khaund, Regional head of TV & Multiscreen, MEC MENA
Do consumers really see TV and online video as one seamless whole? Irrespective of the answer, the convergence is very real at the business end of things, from the perspectives both of content (production and distribution) and marcom. On the former, the online distribution of ‘fluid’ content accessed across screens and consumed on-demand in a non-linear way has fueled today’s so-called Golden Age of Television in scripted entertainment and enhanced live sports, news and other high involvement TV genres through interactive and on-the-go formats. On the marcom side, brands now have the opportunity for more effective video marketing by leveraging a creative asset across channels.
Significant value has been unlocked through both incremental and new revenue streams across an ecosystem that now comprises a wide range of players: TV, OTT, digital Pure Plays, telcos, content creators, media trading, ad tech, measurement and analytics, etc. It is a highly dynamic space with new developments constantly unfolding across domains and players.
This piece analyses a few recent developments in the all-important US market for their key underlying trends. While all of this news is US-specific, it is a good bellwether for the direction video is likely to take in the near-to-medium term elsewhere.
These key trends – most of them deeply interconnected- are as below:
A redefining of the market as Display Branding versus Search Performance: The third edition of the Digital Content ‘NewFronts’ took place in NYC in early May this year. The event mirrors the ‘Upfronts’ in which US TV advertisers bid for scarce Prime Time TV ad inventory in advance of the season. Given the infinite and non-scarce online ad inventory, the ‘NewFront’ is essentially an event to position original digital video content to advertisers and agencies as TV-type shows. To understand the underlying dynamics behind why a medium on an upsurge should position itself along the lines of one that is ostensibly on a downswing requires a reimagining of the market beyond the apparent surface.
The ‘TV versus Digital’ division is flawed in the sense that, unlike TV, ‘digital’ is not one monolith. Specifically, stripping out search – a separate format serving a distinct performance objective – is a more accurate way to size up the market in which most of the (non-Google) digital space competes. Looked at this way, the US ad market reduces by approximately one-fifth to a bucket dominated by TV with a more than 50 per cent share; and this rises to nearly 80 per cent as a share of combined digital display + TV. Add to this the TV subscription pie – bites of which are there for the taking (see below) – and it is a massive value bucket that TV dominates.
The growing importance of premium content in the digital video space: A big part of this is a move towards premium digital video content. ‘Premium’ in the sense of viewers paying not necessarily with money, but with their time and attention for its production values, storytelling and relative scarcity. These are usually created by credentialed producers and typically of longer duration and/or live sports. In other words…TV-like. While the models vary in terms of content genre, licensing versus ownership, payments/revenue sharing and other details across and even within individual players, that end objective is common to all.
Apart from pulling in larger audiences for longer times and with more engagement, premium content provides the brand safety that is such a critical factor in the programmatic-driven marketing world today.
There has been a spate of announcements in recent weeks about the digital majors’ move towards TV-type shows spanning live sports and entertainment, both licensed and original ownership. Facebook, already into streaming live basketball and soccer, is reported to be debuting more than 20 original shows in the coming months. Twitter has struck streaming partnerships with Live Nation, Buzz Feed, WNBA and Bloomberg, with which it will build a 24×7 streaming service. Snapchat already has a big video content play with partnerships with several big-name creators such as NBCUniversal, Turner, BBC, Discovery, ESPN, etc. This included ten-second Snap-only audition clips of The Voice produced with NBCUniversal, with the winner appearing on the live TV show.
This obviously benefits the TV players not only by promoting their content online, but also connecting with the core 18 to 24 demographic, which is the cohort most alienated from TV today.
Google, which differs from the others by drawing from within its own YouTube community creators – who are now stars in their own right – got into this game considerably earlier with the launch of Google Preferred ad product, whereby advertisers can buy the top tier of inventory across interest categories. This was followed by YouTube Red – an ad-free subscription package that streams original movies and series. Over and above all of this is the massive library of music videos and movies in the standard product.
An interesting byproduct of the premium content game is the emergence of YouTube creators branching out as media brands with stakes in ancillary businesses, such as content networks, influencer marketing and branded content, thereby unlocking further value in the chain.
The emergence of the TV set screen for digital video: At NewFronts 2017, YouTube CEO Susan Wojcicki noted that, while smartphones are the main device on which YouTube is viewed, the “…fastest-growing device is the one in the living room”, referring to increased digital video viewing on Connected TV sets – either Smart TVs or TVs connected via streaming devices.
IAB research, for example, reports the ownership among US adults has grown from 44 per cent in 2015 to 56 per cent in 2017. The majors are responding accordingly. For one, ensuring that their apps come preloaded on Smart TV sets. Going further, Google reached a deal with Comcast in the US to enable their customers to search for YouTube videos on their cable boxes. Facebook released a standalone video app for streaming set top boxes.
To be sure, mobile video is by far the fastest-growing market segment and where the action is. The entrance of the Connected TV set in the conversation, however, has a different strategic objective: to be ‘Like TV’, specifically, to be a screen to watch those shows on. Further advertising value would come in from lower ad skipping, greater screen size impact and a general positioning within the shared viewing, living room context. In the future, digital video value could coalesce around the twin contexts of personal viewing on smartphones and shared viewing on TV sets.
A gradual blurring of the line between TV distribution and ad monetization: In Feb 2017, Google launched YouTube TV – an OTT Internet TV “skinny bundle” service that offers fewer channels online at a lower cost than the standard C&S package. It is targeted at ‘Cord Cutters’ and ‘Cord Nevers’, who prefer not to pay for the standard bundle packages of which they watch only a fraction. While these products have been around before this through the likes of Sling TV (or OSN Go closer home in this region), YouTube TV marks the first entry of a digital Pure Play giant into the space.
Beyond the TV distribution opportunity – which, at a net annual cord-cutting subscriber loss of roughly one per cent is relatively modest – the real significant pay-off here is entry into the Addressable TV space. Premium TV inventory sold with rich data-targeting is exactly the value proposition advertisers are seeking now and that is what this move provides to Google. Addressable TV may just be coming sooner than we’ve come to accept.
More concrete first-steps towards Programmatic / Addressable TV: There were two significant news stories in April this may. First, TV rivals Fox, Turner and Vicaom announced a consortium to offer Addressable data-based advertising on their inventory through the OpenAP system, fusing First and Third Party datasets to Nielsen /comCast viewership data. A few days later, Google announced the offering of linear TV inventory programmatically through its DoubleClick Bid Manager in the US, in partnership with ad tech players WideOrbit and clypd and its own Google Fiber broadband service.
Programmatic TV – read automation and data-based targeting systems – has been slow to take off and is still far from prevalent. Two constraints have been the non-connectedness of traditional TV and, even more, the non-participation of networks who are able to command higher yields on scare TV inventory outside these systems. Rapid connectivity gains and overall technology advancements have offset the first problem to a large extent. Now the TV majors, under pressure of flattening or declining market shares, are slowly coming around to tackling the second. Audience-based selling and data play in general are crucial parts of the market they can’t not participate in today. Expect to see more of this.
In conclusion, these are only a few – and less obvious – of several trends in the TV marketplace today. Others such as the growing share of video, especially mobile and programmatic video, are already ‘out there’ enough. The developments highlighted here are all from the US, but they will almost certainly diffuse around the world, including in our region, if at varying speeds and in differing forms. Nor does the piece cover the various other players in the ecosystem, from studios to ad tech. Moreover, these are not an exhaustive list of options and strategies for either the TV or the digital players – each type will have also other plays. For example, the bulk of TV ad revenues will continue to come in traditional ways, while the digital pure plays will expand their video monetising through streams such as e-commerce and direct response. In general, the rapid forward march of digital and a slower decline of TV as we know it will continue even as what constitutes ‘digital’ and ‘TV’ evolves rapidly.
Rather, this piece is to layer in the interplay between TV and digital video over the journey as, in a nutshell, the latter looks as much to participate in the TV market as to take away from it and the former looks to embrace the data-driven targeting and automation of digital. Through this all, content remains king, but data now shares the throne. And this is the interplay that will shape the ecosystem of the near future.
It is already here. Watch this space.
The article appeared in the Sep 2017 issue of GMR.