"On TV And Video" is a column exploring opportunities and challenges in advanced TV and video.
Today’s column is written by Bryon Schafer, SVP of research at Vevo.
Today, the media industry faces multidimensional fragmentation, heightened media competition, limited measurement, and rapidly decreasing TV ad supply. Networks have pivoted toward streaming, and the buying community has followed, resulting in TV networks aggressively packaging hybrid offerings this Upfronts season.
These changes mean looming liabilities and risk management will guide this year's Upfronts. Ad buyers fully appreciate the risk they are fully exposed to in the linear TV ad market – and the true measure of success may be how much exposure to which they can limit themselves.
Here is some food for thought as we enter Upfronts season…
More of “Less Volume, Higher Prices”
Except for cancellation options, TV networks today offer less fluidity and flexibility, not more. They package and market their inventory as being dynamic and fluid to lure buyers, but that linear supply is actually very risky for them.
This is because of the considerable under-deliveries from inventory sold year after year that don’t materialize and need to be made good.
Scarcity – and reluctance to change traditional buying methods – drive these commitments. This becomes risky when the inventory that is purported to be available isn’t there either. You can’t fix scarcity by adding modest streaming inventory priced at broadcast prime rates or higher. Comparatively, this streaming inventory has modest market coverage, and existing supply is frequency driven and doesn’t come close to offsetting the scarcity of linear supply. Given this context, there’s not a lot of upside for buyers to commit to this inventory first, simply to get preferential access or to creatively water down rates.
Moreover, large proportions of linear ad supply is no longer adjacent to extremely valuable entertainment content. Except for sports, most supply consists of news and syndicated and hosted content historically limited in its ability to touch attractive, harder-to-reach consumers.
Streaming NFL Will Expedite Linear’s Erosion
Additionally, streaming efforts by the National Football League will acclimate consumers to accessing live events through streaming. Networks have clearly tripled down on sports, but new distribution opportunities – such as the NFL’s partnership with Amazon – will expedite the path away from linear. These new deals place an overweight bet solidifying sports as one of the few last drivers of meaningful audiences, which are seasonal and also are experiencing erosion among younger viewers.
The NFL today constitutes about 3% of annual linear TV viewership, but about 10% of the market’s licensing costs. Note how this is an investment of more than three times its fair share, by very mature and declining network businesses. NFL annual licensing costs are most, if not all, of what topline network ad revenue still exists, as ViacomCBS, Fox and Comcast (which owns NBCUniversal) are all paying more than $2 billion per year for their packages, while Disney (which owns ESPN and ABC) will pay around $2.7 billion annually, per recent reporting.
More CTV Competition Coming In FAST
These issues are juxtaposed against connected TV’s (CTV) growing free ad supported (FAST) landscape. CTV has a variety of platforms with user data, informing planning and buying validation with modernized versions of Nielsen ratings -- and with markedly better statistical reliability.
This broad and competitive market is not pegged to Google, Amazon and Facebook – so ad buyers are not beholden to them, much like TV ad buyers have been to the networks for their linear supply.
Overall, these CTV/FAST platforms:
- Are more flexible, with digital media’s “DNA”.
- Will deliver, as they only plan for what is possible.
- Have the audiences that marketers want, including multicultural cohorts that have not been historically well addressed through traditional media planning and buying.
- Underscore the importance of a highly diversified media plan.
- Provide much of the measurements endemically to help their delivery and effectiveness into rich and useful contexts.
The FAST space is growing significantly, and quickly, with reduced ad loads, personalized and interactive experiences, improved measurement and data driven solutions. Even the most conservative of buyers can have meaningful stakes in an area that will shortly be the predominant means to reach most consumers.