Home Analysis Broadcasters’ share of AVOD revenue tipped to fall in the coming years

Broadcasters’ share of AVOD revenue tipped to fall in the coming years

Ovum analyst Matthew Bailey
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Over the next five years broadcasters will lose share of ad-supported video-on-demand (AVOD) revenue as the global digital players continue to make gains, according to Ovum.

Speaking at Videoscape Europe in London last week, Matthew Bailey, Senior Analyst, Media and Entertainment at the research firm, predicted that globally, excluding China, broadcasters will see their revenue share of the AVOD OTT market fall from 33% in 2018 to 26% in 2023.

Over the same period he forecast that YouTube’s share of OTT AVOD revenue will dip slightly from 46% to 45% in 2023, Facebook’s will increase from 4% to 11%, while other AVOD platforms will increase their share from 17% to 19%.

“What we’re talking about here is TV-like online video advertising, delivered over the open internet in TV-like video environments,” said Bailey. “We expect broadcasters to drop their share of total OTT AVOD revenue by seven percentage points.

“That doesn’t mean that there’s not growth in that segment, but it means that increasing share of the new growth in the TV and video advertising is going to those digital incumbents – YouTube, Facebook and other AVOD platforms.”

In terms of consumer attention, Bailey said that broadcasters were also “not in such a great position” compared to the big digital players.

When Ovum surveyed internet users in Australia, Brazil, Germany, the UK and the US about 21 major broadcaster apps in December 2018, these online video services had a monthly active user rate of 35% on average, with 9% of these users active on a daily basis.

By comparison, YouTube’s monthly active users (MAUs) rate stood at 75% and daily active users (DAUs) were 40%; Facebook’s MAUs were 57% and DAUs 36%; while the figures for Instagram’s IGTV were MAUs 34% and DAUs 16%.

“Broadcasters are still seeing significant levels of success in driving viewing minutes on their linear environments,” said Bailey. “But the problem is the fact that this OTT segment is going to be accounting for a predominant part of the growth in TV and video advertising over the next few years.

“In order to capture more of that growth, broadcasters and other premium AVOD platforms are going to have to migrate themselves further up into that top-right corner [of the chart – denoting high reach and high engagement].”

In terms of device category, Ovum predicts that the smart TV will be ‘the next battleground’ with installed-base growth of smart TVs set to dwarf that of the already much bigger categories of mobile devices and ordinary TV sets in the coming years.

“When we look at broadcaster video-on-demand advertising revenue, we expect the connected TV is going to drive the most new growth in revenue between now and 2023,” said Bailey. “That’s going to come in spite of a number of challenges.”

These challenges include: reduced viewer tolerance of ads in OTT environments due to the success of ad-free services like Netflix; difficulties around targeting and measurements on cookieless TV environments; and a ‘tech tax’ in distributing via platforms owned by the likes of Roku, Google and Amazon, which are already looking to take a share of ad inventory and revenue.

Bailey concluded: “There’s definitely a case for hybrid monetisation strategies, but a nuanced approach is going to be essential in maintaining success in this environment.”

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