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TMK OTT Overview: June 2019

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Presented by Samantha Stockman: June 11, 2019

Everyone says that TV is dying, but we disagree. TV is not dying, but how we consume content is shifting to OTT. This deck from The Media Kitchen's OTT Committee will give a background on the rise of OTT, arm readers with the basics to navigate and evaluate partners in the ever-changing space, and provide a view on where we think OTT is headed.

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TMK OTT Overview: June 2019

  1. 1. FINALLY, YOU PUT MY LOVE OVER THE TOP June 11
  2. 2. AGENDA ● TMK loves OTT...but has some questions ● Rise of OTT ● More content than ever ● Opportunities & best practices ● The future 2
  3. 3. T M K L V E S <3 O V E R T H E T O P T V O 3
  4. 4. TMK VIEWING BEHAVIOR 51% have a cable subscription 45% subscribe to 4-6 services & 96% subscribe to 1+ are the top streaming services 83% share logins with 1+ HHs & 30% share with 3-5 Sample size n=53 4
  5. 5. TMK TOP SHOWS Dead to Me on Netflix is TMK’s most popular recently binged show for 8 chefs But with 39 shows listed as recent binges for 53 survey respondents, chefs are watching a lot of different content Chefs are much more consistent in choosing the one show to watch for the rest of their lives - 36% would go back to the classics, choosing Friends and The Office Sample size n=53 5
  6. 6. TMK OTT BUYING Pain Points Differentiating partners & offerings Inventory transparency Measurement Sample size n=53 68% of chefs buying OTT for clients spend <$1MM 41% of chefs feel confident communicating OTT acronyms to clients 6
  7. 7. How do consumers see our ad? How do we buy in a fragmented world? How do we evaluate inventory quality across partners? Is OTT worth buying vs. traditional TV or Facebook? What measurement is possible and how is it evolving? Where is OTT headed? TMK’S BIGGEST QUESTIONS Sample size n=53 1 2 3 4 5 6 7
  8. 8. The Rise of OTT More Content Than Ever Opportunity & Best Practices The Future The Rise of OTT
  9. 9. Over-the-Top Television Provides access to video content via a high-speed internet connection, bypassing the traditional cable/broadcast provider wired connection 9
  10. 10. WHAT IS CONSIDERED OTT? Sources: comScore “State of OTT” June 2018; Freewheel; Nielsen Total Audience Report, Q1 2018, Internet enabled TV-Connected Device = game console, internet connected devices and smart TVs via VAB - Report 2018 “Linear TV and OTT: Living Together in Harmony” Full Episode Clips Live MOBILE CTV DESKTOP GAMING CONSOLES 31% of HHs SMART TV ATTACHED DEVICES 47% of HHs 37% of HHs 10
  11. 11. 60MM HOMES ARE CONNECTED TO OTT Sources: comScore “State of OTT” June 2018 60.7% 64.1% 54 hours streamed/month/HH +28% rise in time spent YoY 2.7 average devices per HH 75% of streamers prefer to watch OTT content on a connected TV 11
  12. 12. CONSUMERS ARE STILL WATCHING LINEAR TV 73% of US households are cable subscribers ...but Q4’18 linear TV subscription loss was the highest ever at -4.1% and is expected to continue on this downward trajectory USviewers(millions) Sources: VAB - Report 2018 “Linear TV and OTT: Living Together in Harmony”; eMarketer, July 2017; Nielsen SVOD data 12
  13. 13. 2007 20202008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 BUT THEY ARE REPLACING & SUBSIDIZING WITH 200+ OTT SERVICES 13
  14. 14. SO CONSUMERS CAN CHOOSE THE SERVICE(S) THAT BEST FIT THEIR NEEDS Source: WSJ “There are five different races in streaming TV,. Here’s where Apple fits in.” April 2019 Streaming services are competing for consumers’ attention and money in five key categories 14
  15. 15. CONSUMERS ARE STACKING SUBSCRIPTIONS Source: Parks & Associates OTT Services: Purchasing and Perceived Value; Kagan Market Intelligence Number of Subscription Services Among US Broadband HHs Subscription Services in HHs 15
  16. 16. SO THEY CAN WATCH EVERYTHING THEY WANT TO WATCH Must have content features for consumers with one streaming service. Every feature gains importance with each additional subscription a consumer buys. Source: Hulu study with Hub research, March 2019 35% Favorite shows 16% Original shows 17% Exclusive shows 16% Exclusive movies 16
  17. 17. The Rise of OTT More Content Than Ever Opportunity & Best Practices The Future More Content Than Ever
  18. 18. Viewing Behavior Gen X Millennials Gen Z Watch multiple episodes in a single sitting 44% 56% 60% Binge-watch the same show through to the end 38% 43% 53% TO CONSUMERS, IT’S ALL TV & THEY’RE WATCHING MORE THAN EVER Sources: Hulu, WSJ Binge Watching > 50% of viewing sessions on the top 100 shows on Hulu consisted of 3+ episodes in the same series 129K Hulu viewers watched all 180 Golden Girls episodes (2 mo average) On-Demand Viewing 13.6MM people watched the GoT series finale during the 9pm viewing on HBO 44.2MM viewers watched each episode in S8 - just not necessarily when it aired Comfort Viewing 5 of the top 10 shows people chose to view after a S2 episode of The Handmaid’s Tale on Hulu were comedies 18
  19. 19. STREAMING SERVICES ARE CREATING ORIGINALS TO DRAW IN CONSUMERS Source: Nielsen, Moffett Nathanson Number of Scripted Originals Change in Content Investment 2012-2019 (Billions) 19
  20. 20. CONSUMERS WATCH WHAT, WHEN AND HOW THEY WANT Live on NBC NBC App NBC on HuluvMVPD NBC on Demand 20
  21. 21. The Rise of OTT More Content Than Ever Opportunity & Best Practices The Future Opportunity & Best Practices
  22. 22. OPPORTUNITY TO REACH CONSUMERS IN AD-SUPPORTED ENVIRONMENT % of OTT consumers who mostly watch AVOD Sources: MAGNA, April 2018; MAGNA Intelligence, “Magna Advertising Forecast (Spring 2019): as cited by MediaPost, April 5, 2019, as cited by eMarketer 73% of adults watch ad-supported OTT 36% of AVOD viewers use ads to learn about new products/brands/services 98% average ad completion rate for connected TV 22
  23. 23. OTT COMBINES BEST OF BOTH WORLDS Source: Freewheel; VMR 2018 OTT Premium environment: full screen, viewable, often unskippable Lean-in experience: intentional, engaging Granular targeting: mix of 1p & 3p data to buy specific users Unique formats: sponsorships, content curations, interactive Measurement: track online & offline conversions through 3p partnerships, beyond R/F OTT is a “digital” experience when it comes to targeting and measurement, and a “TV” experience when it comes to content quality and delivery. 23
  24. 24. BUT OTT CONSUMPTION & AD SPEND ARE DISPROPORTIONAL Sources: MAGNA, April 2018; MAGNA Intelligence, “Magna Advertising Forecast (Spring 2019): as cited by MediaPost, April 5, 2019 via eMarketer; eMarketer 10/30/18 “Advertisers shouldn’t choose between linear TV and CTV, they need to do both” OTT 29% Linear TV 71% Linear TV 97% OTT 3% Time Spent Ad Investment 15% of advertisers regularly include OTT in their media plans $2.7B US OTT ad spend in 2018 $5B projected US OTT ad spend in 2020 24
  25. 25. WHY? Inconsistent definitions Extremely fragmented Undefined inventory hierarchy Lack of standardization & transparency 25
  26. 26. LOTS OF ACRONYMS & TERMS OTT CTV AVOD FEP SVOD MVPDAdvanced TV Skinny bundle TV everywhere D2C TVOD V-MVPD VOD ACR SSP TV 2019 26
  27. 27. WITH INCONSISTENT DEFINITIONS Sources: Interactive Advertising Bureau (IAT), “Digital Content NewFronts: 2019 Video Ad Spend Report” conducted by Advertiser Perceptions, April 29, 2019 via eMarketer 48% Streaming video that appears on a TV Streaming video on any screen 50% Other 2% US agency and marketing professionals define OTT differently, leading to confusion and inconsistency in the marketplace 27
  28. 28. LANDSCAPE IS EXTREMELY FRAGMENTED Source: VAB 1Q’18 “You Down With OTT?” 28
  29. 29. Programmatic Biddable Programmatic Guaranteed Managed (IO-based) WITH MANY WAYS TO BUY Upfront ● Direct buy with a publisher ● Executed & managed by the publisher after a contract is signed ● Contract outlines CPM, cost, placement, cancellation terms, etc. ● Guaranteed publisher inventory purchased programmatically ● Gives agency more visibility & control to make optimizations ● CPMs locked (v. dynamic) & optimizations limited ● Inventory not guaranteed ● Agencies bid on publisher inventory through DSP ● Agencies have more control over optimizations, incl. pausing campaigns ● Commit to a large buy when major TV networks & streaming services announce next season’s lineup ● Often in conjunction with a TV buy Buy How it works Example Partners 29
  30. 30. DSPs, SSPs & marketplaces PARTNERS CLAIM ACCESS TO THE SAME INVENTORY Devices Aggregators/vMVPDs TV everywhere Buying at the top of the diagram gives access to the largest repository of inventory 30
  31. 31. BUT QUANTITY QUALITY It’s important to evaluate where partners’ inventory falls in the waterfall - first look at inventory often comes from direct buys with publishers who then make a portion of their inventory accessible via SSPs Direct Buy Ad Server/ Marketplace SSPs 31
  32. 32. LACK OF STANDARDIZATION & TRANSPARENCY IN MEASUREMENT This “wild wild west” approach is particularly an issue for connected TV where consumption is seeing the highest growth. 1 TVs are cookie-less and not trackable across providers, providing a challenge for attribution 2 Many OTT platforms are walled gardens, making access to data available only in a silo 3 Closed systems often means no universal reach/frequency control or view across partners 4 Password sharing (e.g. Hulu, TV everywhere) is rampant, making de-duplication across households or devices within a household impossible and leading to misreported reach/frequency 5 Partnership deals often don’t allow brands to cherry pick shows/episodes or give visibility in reporting to what shows/apps buy ran across 6 For brands also buying TV, no standard for comparing delivery or success of OTT vs. TV 32
  33. 33. HOW CAN WE HELP? Identify key players Evaluate pros & cons Ask (lots of) questions Push industry for transparency & measurement 33
  34. 34. KEY OTT PLAYERS Ad-free Devices Ad Supported TV Everywhere Aggregators/vMVPDs DSP/SSP/Network 34
  35. 35. BEST PRACTICES ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ No one size fits all solution Determine what’s most important to your client Consider the inventory supply path Apply block/white lists & push for granularity in reporting Identify what to optimize toward & what measurement is available Buy on audience or contextually, as all OTT is primetime Specify where to run: live, on demand, direct, everywhere Utilize unique, attention-grabbing formats with relevant creative Test & learn! 37
  36. 36. The Rise of OTT More Content Than Ever Opportunity & Best Practices The Future The Future
  37. 37. FUTURE TRENDS Consolidation & rise in power of super aggregators Subscription fatigue & rise of AVOD Personalization More transparency & lower CPMs 39
  38. 38. CONSOLIDATION: THE BIG 4 (+ APPLE?) Source: VAB 1Q’18 “You Down With OTT?” Other At some point, consumers will hit subscription fatigue and stop stacking additional paid services. The winners are already licensing beloved existing content and producing original content. Share of OTT Viewing Hours 40
  39. 39. CONSOLIDATION: REMAINING WILL FULFILL A NEED Source: stratechery.com Job Business Model Go to market Company Brands & Family Subscription + Disney Flywheel Direct to consumer News & Sports Ads & affiliate fees Traditional TV distributors Information & Education Ads Search Stories & Entertainment Subscription Direct to consumer Niche & Left Behind Subscriptions, ads, content sales Resellers 41
  40. 40. RISE OF AD-SUPPORTED VIDEO ON DEMAND (AVOD) The proliferation of subscription-based services has led to subscription fatigue and an increased consumer interest in AVOD, particularly among younger (18-34) and male viewers. Top partners include Amazon IMDb’s Freedive, Viacom’s PlutoTV (also their first Spanish-language service), Walmart’s Vudu, WatchFree and TubiTV. While AVOD features largely catalog content, players are beginning eye creating original content to compete with SVOD. However, it remains to be seen if they can even begin to challenge SVOD fare. 45% of streamers watch AVOD OTT the most 52% of AVOD viewers are cord cutters or cord nevers 75% of AVOD viewers don’t mind ads as long as content is free 42 Sources: Nielsen, IAB, MediaPlayNews
  41. 41. THE END OF THE VIDEO COMMERCIAL As more players develop in the OTT space, the competition for share of ad dollars has spurred many platforms to develop ad solutions that help brands stand out on a given platform beyond the standard video commercial. Co-branded slates In-show integrations Seasonal sponsorships Pause Ads Binge Sponsorship Easter Egg Placements Channel Sponsorships Movie Night Streaming Guides Interactive Units 43 Sources: Hulu, Roku
  42. 42. TRANSPARENCY ReportingTargeting Before ● cherry-picking ● whitelist & blocklist geos, demos, custom audiences, channels, apps, shows After: ● in-depth reporting (app/show level) ● cross-device geos, demos, custom audiences, channels, apps, shows Industry demands will push publishers to become more transparent with what’s available in both targeting and reporting 44
  43. 43. SUMMARY & NEXT STEPS
  44. 44. KEY TAKEAWAYS 1. OTT is mainstream and growing among all ages 2. Many long tail services exist, but consumption of OTT is concentrated to major players and will likely consolidate 3. Transparency and tracking are currently lagging, but expect to come with more ad spend 46
  45. 45. THANK YOU!
  46. 46. GLOSSARY Advanced TV: umbrella term for all TV not viewed through traditional satellite, cable or broadcast Over-the-top (OTT): access to video content via a high-speed internet connection, bypassing the traditional cable/broadcast provider wired connection Connected TV: a TV set connected to the internet via an attached device, gaming console, or SmartTV Video on demand (VOD): time-shifted viewing of TV programming on any device, accessible at the viewer’s convenience Transactional video on demand (TVOD): viewer pays based on the amount of content watched (e.g. pay for new movie release on Amazon Prime) AVOD: ad-based video on demand that is free for consumers SVOD: subscription video on demand, paid for by consumers (e.g. Netflix, Hulu, CBS All Access) Multi-channel video programming distributor (MVPD): aggregator service that provides access to multiple television channels via satellite or cable Virtual MVPD (V-MVPD): Distributors that aggregate linear TV content licensed from major programming networks and package together in a standalone subscription available through the internet (e.g. SlingTV, Hulu Live, DirectTV Now) FEP: full episode players, regardless of device played on Automatic content recognition (ACR): software technology with the ability to identify content based on sampling a portion of audio, video, or still images; used to compile reliable data about viewers’ habits and build audiences with the intent to retarget or competitively conquest Set top box (STB): hardware that translates broadcast signal onto TV Addressable TV: automated by that serves different households different ads at the same time 49

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