A significant number of disruptor OTT providers, including sports aggregators and VOD services, are looking to introduce advertising to what have previously been subscription-only business models. They need the hybrid monetisation option to help fully exploit their content, especially as they invest more in rights acquisitions. This is the view of Thomas Bremond, General Manager International at FreeWheel (the advanced ad-tech provider) and Comcast Technology Solutions (which provides a complete solution for publishing and monetising digital video content, covering everything from transcoding to delivery and commerce).
The big question is who could help these OTT companies, who have no heritage in advertising sales, no ad-tech and no sales houses, to get into the advertising market. According to Bremond, the answer should be existing commercial broadcasters. He thinks the traditional TV industry should partner with OTT providers and become their advertising sales representatives, recreating the kind of model applied to linear broadcast TV at Sky Media, for example, where Sky sells advertising across its own branded channels and dozens of other channels owned by the likes of Viacom, Fox International and A+E Networks.
Speaking at Future TV Advertising Forum two weeks ago, Bremond declared: “The OTT providers could go to Google and ask them to represent them [using the Google tech stack and its programmatic sales options]. But as this is premium content, the smart move for the OTT side and those in traditional media is to work with someone that knows how to sell TV and has experience of selling live TV, as well.
“I would go to a traditional broadcaster. This is a great opportunity for commercial broadcasters, who know how to package deals. The upside for marketers is the ability to target OTT audiences. OTT platforms get to grow an advertising business model. There are lots of OTT platforms out there looking at their next step, and talking about hybrid, so this becomes a significant opportunity to aggregate new audiences.”
Bremond admits that the OTT providers compete for consumer attention and therefore audience share and so add to the pressure on ad-supported broadcasters who are already fighting a battle for marketing budget against the digital giants Google and Facebook. So why should channel owners help streaming services that, in some cases, are burning through private equity cash and who, without changing their business model, might run into trouble?
“Consumers are the key. They have shifted to new forms of video usage. The programming that broadcasters offer will not represent 100% of the audience, like it used to, even without these OTT services. Someone else will come along with funding and the cycle would start again.”
The message is clear: OTT is not going away, regardless of what happens to existing services. Lots of subscription-only disruptor streaming services will, according to Bremond, introduce advertising, with or without broadcast industry partnerships. The only question is who will help them.
Addressing an audience of broadcasters, brands and agencies in London, he revealed that FreeWheel and Comcast Technology Solutions are talking to many OTT providers about enabling hybrid business models. “We are having a lot of these conversations, so the opportunity is now.”
FreeWheel and Comcast Technology Solutions are convinced that most of the television market will become hybrid, as over time it will become clear that you cannot fully maximise the value of content by sticking rigidly to an advertising supported model or a pure subscription or transactional model. This means that many traditional commercial broadcasters will also introduce subscriptions or other forms of payment for digital services – a trend that has already started, as witnessed at ITV in the UK, TV2 in Denmark and Hulu (the direct-to-consumer platform currently owned by Disney, Comcast/NBCU, 21st Century Fox and AT&T).
Bremond observed that many OTT disruptors started life with subscriptions because it is easier than building out an ad-supported model. Some have been extremely successful and have spent a lot of money on content, and some are profitable. “Many have funded big sports rights deals and other content acquisitions, and some are asking whether subscription-only is sustainable for the long-term. A lot of them have concluded that they need advertising.”
This does not mean they want to pivot to advertising-only support – far from it. The proposition from Comcast Technology Solutions and FreeWheel is to carefully choreograph how much content is made available either discounted or free with ad-support, and which content this applies to and when (e.g. in which viewing windows).
The same nuances will be applied to traditional commercial broadcasters – they will need to work out what content moves from ‘free-with-ads’ to paid, and in which windows. In the case of broadcasters, it might make sense to create a pre-broadcast digital window for content you own all the rights to, and offer that to super-fans on a subscription basis, for example, perhaps with access to catch-up content that lasts way beyond the typical 30-day catch-up window (like in the form of box-sets).
Bremond is convinced that the introduction of advertising to OTT services that are not provided by legacy channel owners is a “very significant” revenue opportunity for the platforms, rather than an incremental one. One of the biggest sources of growth will be advertising within live linear OTT content, like sports, he reckons. Consumption of live OTT is growing very fast; there is lots of inventory that could be exploited, and this is often next to first-class sports and so suitable for big brand national and international advertisers.
But it is complicated to manage TV-standard and TV-compliant advertising (whether you are talking about legal/regulatory compliance or simply the commercial compliance issues that TV manages day-to-day, like avoiding rival brands in the same ad break or ensuring the same advertisement does not appear twice in the same programme). Bremond reiterates: “As these companies evolve towards a more advertising-supported model, they become a great representation opportunity for existing broadcasters.”
Bremond says the drive towards hybrid monetisation models, across OTT disruptors and legacy broadcasters, reflects the need to establish a better balance between revenue, consumer experience and partner experience (which encompasses how you treat content you buy from rights partners, and the experience you give to advertisers – like whether their advertising is seen in uncluttered ad breaks where they can achieve ‘attention breakthrough’ rather than becoming background noise). With Comcast Technology Solutions, FreeWheel is helping media companies to work out the optimum balance that will appeal to different user groups.
As we all know, there are consumers who are ad-shy and can afford to pay to avoid them, and there are consumers who are averse to any payment and will put up with any advertising, and then a wide spectrum in inbetween. One of the mega-trends in television and video is the way the total market is being segmented into finer slices – reflected in the appearance of thematic direct-to-consumer services including niche SVOD, and skinny Pay TV bundles. Price points have become much more varied.
FreeWheel, whose technology takes care of ad decisioning, broadcast-standard compliance and yield optimisation – supporting direct and programmatic sales and holistic multiscreen campaign management – has long focused on maximising advertising revenue and forecasting it. Working with Comcast Technology Solutions, it has become realistic to think seriously about forecasting the total revenue that can be squeezed from a piece of content from the day you acquire it to the end of its effective life.
Forecasting tools covering rights acquisition and packaging have not previously existed, says Bremond. The decision to make content available with advertising support or subscriptions is an instinctive decision today. “We are trying to put some data into that equation.”
Orchestrating the value of content across all windows and screens, using transactions, is complicated, and adding advertising to the revenue forecasting mix makes everything more difficult. But this is what FreeWheel and Comcast Technology Solutions are attempting, since, for the first time (they believe), it is possible to marry advertising and commerce data, including historical data, in a way that makes holistic revenue modelling possible.
“There is data that can help you with that. We are the technical provider that can tie transactions and advertising together. We can help optimise from a revenue perspective and from a UX perspective,” Bremond declares.
It is possible for a media company to work out what happens if they take a drama series that is currently behind a subscription wall and make it available free, with ad-funding. How many subscriptions will you lose, and what advertising revenue can be gained? The answers will demonstrate which monetisation option might work best on a granular basis, per content asset, per window, for example. Equally, the modelling will say what happens if you take a series out of a free ad-supported model and attach a subscription.
Right now, FreeWheel and Comcast Technology Solutions can make these calculations by fusing data from their separate advertising and commerce engines, in situations where a media owner is a customer of both companies. The two vendors are actively working with several media companies today to achieve this whilst working on a forecasting tool that will give the answers without the data integration. “We want to provide a forecasting engine that tells you what business model to use to expose content to consumers,” Bremond reveals.
Mixing advertising with subscriptions requires careful attention to packaging and branding to avoid consumer confusion. If they pull this off, could a traditional broadcaster host AVOD (advertising-supported VOD), SVOD and TVOD (transactional-supported) under one roof and possibly avoid the need to license third-party digital distributors to exploit these models for them? Can they avoid giving their back-catalogue to Netflix (SVOD) or box-sets to Apple (TVOD)? “Possibly,” said Bremond, clearly avoiding the chance to commit fully to that idea.
If the market needs hybrid monetisation, the inference is that content owners and distributors are leaving money on the table by using pure-play business models. Bremond confirmed to the Future TV Advertising Forum audience that this is what FreeWheel and Comcast Technology Solutions think. Even more money could be left on the table by subscription-only models as television and premium video providers achieve the means to chase new marketing budget using addressability, offering marketers the chance to use TV for lower-funnel activities, going beyond brand building and into activation – like persuading viewers to visit a website or a showroom. Better attribution is proving that television can achieve this.
Bremond reckons there are new advertisers who will come to ‘television’ (which includes premium video services online) to exploit the new data-driven capabilities. Legacy channel owners can benefit from this, of course, with the arrival of more local advertisers plus digital brands who have grown as large as they can via digital-only marketing and now need the wider exposure that TV (and TV-standard premium video) can provide.
This is where the creation of more OTT advertising inventory could help the advertising market as a whole, providing a new home for such advertisers. Advertisers (brands and their agencies) want the best reach possible into consumer groups via their chosen advertising media so anything that takes eyeballs out of advertising – especially from premium commercial broadcasters – would normally make them cry. But Bremond believes the eventual dominance of the hybrid model will deliver a net audience gain to the advertiser community.
“The moment some of those subscription [OTT] platforms open up to advertising, it will be a benefit to advertisers. Marketers want to understand the benefits of this audience, but they want an easy way to buy them. Right now, if a marketer wants to reach these audiences they would have to reach out to 50 or 60 different publishers. That is why there is a tremendous opportunity [for traditional broadcast sales houses] to aggregate these audiences.”
He adds: “If you look today at Sky, they have well over 100 channels of linear TV [sales representation]. This is the principle [that can be applied to OTT audience aggregation by the broadcast industry]. You can do the same thing with OTT platforms, aggregating all the new audience destinations.”
Videonet first reported on the growing interest in hybrid monetisation at FreeWheel and Comcast Technology Solutions here.
You can hear what the two companies are saying about hybrid monetisation, in their own words, in this corporate video.
Find out more about Future TV Advertising Forum, the No.1 strategy and thought leadership summit for TV advertising, here.