"On TV And Video" is a column exploring opportunities and challenges in programmatic TV and video.
Today’s column is written by Jeremy Hines, a principal at Infinitive.
With the development of addressable TV and dynamic ad insertion, the industry is making clear and tangible progress toward the long-discussed goal of convergence. But, at the same time, the continuing fragmentation of content distribution appears to be throwing up major barriers to the merging of linear and digital advertising strategies, budgets and operations.
The proliferation of nontraditional content producers, multichannel video programming distributors (Amazon Prime, Netflix, etc.), skinny bundles and standalone content distribution apps (HBO Go, Showtime Anytime and CBS Access) is reconfiguring the competitive landscape for how viewers access, consume and pay for video content and how advertisers buy, traffic and measure advertising across these platforms. It affects all stakeholders.
The barrier to entry for distribution channels has dropped precipitously – to the point that it can hardly be considered a barrier.
Traditional content creators, such as broadcast and media companies, can create their own apps to monetize their libraries or do so by partnering with Hulu, YouTube or other platforms. Meanwhile, Amazon, Google, Netflix and Hulu have realized that, with their technology and customer bases, it makes sense to create their own content. Who knew that signing up for free shipping of ecommerce orders would one day lead to free access to high-quality television programming?
For Google, Amazon and Netflix, advertising is not a priority. They are fully focused on digital video to gather user data, cross-promote their other services and drive value to their subscription base. Their specific objectives in content distribution are to strengthen ties to existing customers, attract new users and subscriptions with high-profile offerings, fill their libraries with content they control in perpetuity and – perhaps most importantly – cut down on ever-increasing licensing fees.
Despite the blurring of lines, many skeptics and considerable organizational resistance remain. Certainly, distribution fragmentation makes it harder in the near term for advertisers to engage audiences and measure performance via one metric. Hence, there is strong temptation to keep buying and selling TV in the same old way.
But it’s hard to see how linear and digital can remain separate over the long term. Nielsen’s recent push for standardized cross-screen measurement is telling. Content creators that see their audiences consuming more video through digital devices and channels want these holistic views. Advertisers do, too.
Convergence is taking hold in other practical ways. Ad-buying budgets now combine linear and digital into a single “video” category, even if by necessity performance is tracked and reported separately. Similarly, consider the new distribution channel of digital MVPDs; a viewer live-streaming a show via DirectTV Now or Hulu’s soon-to-be-launched service will see ads presented that were most likely purchased and trafficked through a linear process and are attributed to linear channels by Nielsen’s C3, even though the content is being consumed digitally.
The Consumer View
Clearly, consumers like having new and more options to watch their hot new series or favorite old movies. And distributors are giving them more of what they want. MVPDs and standalone streaming services now allow for streaming of live network TV on digital devices. More options for live-streaming and skinny bundles will undoubtedly follow.
The fragmentation of the distribution landscape also presents consumer experience issues, especially if exclusivity windows for certain shows remain in place. Yes, content is more valuable than ever. But viewers must be able to find the programming they want if publishers are to monetize their content and advertisers find the targets they seek.
New “TV guide” apps from Apple and Yahoo that let users scan and search across digital TV providers are designed to address this problem. Of course, it’s another chance to capture valuable data about user preferences that can be used to target ads more precisely. This is the digital video equivalent of how web browsers capture search data from the navigation bar versus search engines capturing the data from their dedicated search bars.
The Advertiser View
For advertisers, the essential question around digital distribution is becoming more urgent: How do I reach millennials and younger audience segments who are increasingly watching only through digital channels? As Nielsen numbers for linear continue to decline and skew older, the answer is increasingly hard to answer. Plus, there is the challenge to turn around a measurement system (Nielsen’s) that has been in place for nearly 70 years.
It is also worth asking if advertising is the best way for content creators to monetize their premium video. The rise of hybrid and ad-free models, where consumers pay an elevated subscription or membership fee for access to specific video content, may severely limit advertisers’ ability to reach crucial demographics.
Advertisers will continue pressuring media companies to deliver complete and fully integrated customer views. They will seek more refined targeting and better reporting across all channels and formats. But distributors may ask advertisers to be more sensitive to consumer experience concerns or get more creative in their offerings and messaging.
Advertisers must also move beyond their traditional comfort zone of gross rating points (GRPs) and show a greater willingness to test and learn. Though still in its infancy, addressable TV, which uses personal set-top box data such as location or income level to target linear TV buys, offers a great place for advertisers to put their toes in the water before diving deeper into the kind of targeting of which digital is capable.
The Publisher Perspective
So what can publishers do as the distribution situation evolves? On the technology front, service providers and software vendors are pitching new offerings to address these problems and help both advertisers and media companies seize the opportunities. But, for most companies, it’s not yet time to redesign ad tech stacks or deploy expensive new software.
A better first step is to ensure that current tool sets, including ad servers, order management systems and data management platforms, are optimized and integrated to provide cross-channel visibility of their most prized customers. Publishers should also look to align linear and digital sales staff so they are not working toward conflicting goals. Such steps will pay dividends however the distribution landscape shifts and evolves.
The Big Picture
The metrics, business processes and organizational structures on the buy and sell sides of the industry have not kept up with consumer preferences for cross-platform and multidevice viewing. Nor are they synchronized to the technical infrastructure, which can deliver what users want when and how they want it.
The long-term momentum still points to convergence, even if increasing fragmentation of the distribution landscape makes near-term progress more challenging for individual publishers and advertisers. It’s safe to say that those companies that prepare for ongoing disruption will be those best positioned to take advantage of it.