The September issue of Admap puts the spotlight on smarter video planning. Christopher Vollmer of MediaLink explains the successful growth of connected TV and some challenges it faces.
- The biggest players in media are rolling out new, ad-supported streaming services as they look to challenge Silicon Valley’s tech titans
- The media industry will be forced to rethink how TV advertising functions, given consumers’ growing control and eroding ad tolerance. Accelerate bets on ad-supported CTV, innovative new ad formats, and other new marketing opportunities
- The growth of ad supported CTV expedites the move to “discovery”-driven ad formats and experiences
While much of the entertainment and media industry has obsessed with the meteoric rise of subscription video services like Netflix and Amazon Prime, over the last few years consumption of ad-supported streaming content via connected TV (or CTV) has exploded.
In fact, CTV is the fastest-growing ad-supported platform in entertainment and media today. Magna Global predicts that brands will spend $3.8bn on CTV in 2019 and $5bn by 2020, while national TV spending is expected to dip by 3% in 2019.
In light of CTV’s explosive growth, the world’s biggest entertainment and media companies – including Disney, Comcast, ViacomCBS and AT&T – are placing massive bets on this sector. Their success will determine whether the video advertising business’s future is ruled by the traditional titans of television or the digital disruptors.
There are compelling numerous reasons why CTV is appealing to marketers. The medium attracts younger cord cutters, who are abandoning traditional TV, but may also be facing paid subscription fatigue. CTV is also addressable and targeted, much like digital advertising.
At the same time, CTV faces challenges, including increasing fragmentation across devices and services which makes reliable and comparable audience measurement difficult. Standards around new CTV ad formats, pod management and frequency capping have yet to scale, further adding to the media complexity facing marketers and their agencies.
2020: the new streaming landscape
Over the next 12 months, the media and advertising landscape will be shaken up by a series of major launches from big media companies:
Disney is making perhaps the biggest bet in media with the launch of Disney+ in November 2019. Disney+ will feature library content from Disney, Marvel, Pixar, LucasFilm, National Geographic and The Simpsons, as well as exclusive, new original series from Marvel and Star Wars – all without ads. Disney+ will be priced $7 per month or $70 per year – an aggressive strategy, considering that Netflix starts at $12.99.
While Hulu isn’t new, the one-time media joint venture is now fully-owned by Disney. With 28 million subscribers, Hulu is now the third-largest streaming video service in the US after Netflix and Amazon Prime Video. However, unlike those services, advertising is core to its business model. Hulu has also taken the lead in introducing advertising formats that are designed for the CTV viewing experience (eg pause ads, binge ads).
Launched in 2018, this service is ESPN’s direct-to-consumer video streaming offering supported by both subscriptions and advertising. In August 2019, Disney announced that ESPN+ has 2.4 million subscribers.
Disney also recently announced a $12.99 bundle for Disney+, Hulu’s ad supported service and ESPN+. This packaging approach essentially gives subscribers ESPN+ for free, suggesting that Disney needs digital advertising revenues to play an even more significant role in its streaming video revenue model as ESPN+ subscribers increase.
Coming in 2020, this is WarnerMedia’s big push into the direct-to-consumer streaming world, following AT&T’s $85bn acquisition of Time Warner. HBO Max is expected to cost $16-$17 per month and will feature content from HBO, Turner, Warner Brothers and DC Entertainment. There appear to be plans to introduce ad-supported tiers after the initial 2020 launch.
Launching in April 2020, this ad-supported service will be “free” to pay-TV subscribers. The product is expected to feature Universal films, current NBCU shows, as well as the ever-popular The Office, which is set to leave Netflx by the end of this year.
Apple is set to roll out its subscription video product in the fall of 2020. The company is pumping millions into high-profile movies and series. Apple’s video service will launch at $9.99 per month and will not feature advertising.
The announced combination of ViacomCBS will create a sizable portfolio of subscription as well as ad-supported streaming services. Viacom has PlutoTV, a leading ad-supported streaming platform, which it acquired in early 2019. CBS already boasts eight million subscribers of its CBS All Access product, which has both a subscription, ad-free offering as well as an ad-supported tier. CBS has also launched CBS Sports HQ, ET Live, and CBSN, a news-focused service – all ad-supported streaming services. ViacomCBS has already signalled that digital advertising growth will be key to the company’s overall growth efforts moving forward.
What happens next for advertising
Perhaps the biggest impact that these services will have on media and advertising is that they will accelerate the consumer shift toward video streaming and away from conventional pay-TV.
Advertisers are likely to spend more time on CTV, seeking its brand safe, TV-like ad inventory and targeting capabilities. That spending shift may come at the expense of mobile and social video offerings. On the flip side, the growth of advertising-free subscription video may make it more challenging for marketers to reach higher-income households, as those more affluent consumers can increasingly pay to avoid advertising.
With viewers less tolerant of interruptive and repetitive advertising, it will be vital for media companies to get CTV’s ad load and frequency right – lest they risk alienating viewers. They will also need to focus more on ad format innovation.
Finally, brands will be hunting for new marketing opportunities that are discovery-driven and integrated into subscription video streaming environments, such as the many product tie-ins visible in Season Three of Netflix's Stranger Things.
Regardless, the next few years promises a fierce battle between the largest companies in media and entertainment and several powerful digital platforms. On the line is not only control of the $70bn US television advertising market, but also which companies will win in an increasingly video streaming-dominated entertainment and media landscape – not to mention how marketers will build their brands with consumers in the 21st century.