That’s an intentionally provocative question, designed to spur “dialogue,” of course.
Obviously, platforms designed to facilitate audience-based television buys through
linear, addressable or over-the-top are each betting their businesses on the futures of those respective platforms.
And the safe answer is that all will continue to be part of the mix for some
years to come.
But since previous Audience Buyer Insider columns have presented the benefits and limitations of addressable, it seems time to turn some attention toward connected and OTT.
Current Scale, Growth Trends
At this point, OTT’s biggest drawback is one that it has in common with so-called “people-based” TV buys on all platforms, to varying
degrees: limited scale or availability.
Stats relating to OTT and Internet-connected devices underline that while still relatively small versus traditional platforms, OTT is growing
rapidly. Yet, major forecasters like PwC by no means project dominance for OTT, at least within their five-year or so window. As usual, there are many stats out there, and forecasts often vary
widely.
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Here are a few stats that show OTT growth, as well as some that speak to continued health for traditional.
- In December 2016, TV consumption via Internet-connected
devices (including Roku, Apple TV and Google’s Chromecast) among adults 18 to 49 grew 66% year-over-year, to account for 9.2% of their total TV use on a total-day basis, reported Pivotal
Research Group, citing Nielsen data. That was up from 5.6% in December 2015 and 3% in December 2014. Among households as a whole, this viewing jumped 68% YOY, for a share of 5.9% of total TV viewing
— up from 3.6% in December 2015 and 1.8% in December 2014.
- Among Millennials, OTT accounted for 37% of total TV viewing time as of Q3 2016, per Nielsen. When live
sports and news (a big chunk of linear TV viewing but a small share of OTT viewing) are backed out, a majority of scripted TV viewing among Millennials occurs via OTT.
- E-Marketer
projects that 54% of the U.S. population will be watching some digital TV by 2019, and that audiences will spend 14.5 hours per week watching OTT video by 2018.
- In first-half
2016, consumer research from Leichtman Research Group found that 65% of U.S. TV households have at least one TV set connected to the Internet via a video game system, a smart TV, a Blu-ray player,
and/or a stand-alone device (like Roku, Apple TV, Chromecast, or Amazon Fire TV), up from 44% in 2013, and 24% in 2010. (Magid research found the penetration in 1H 2016 to be significantly higher:
74%, up from 59% in 2015 and 26% in 2013. E-Marketer projects that 54% of the U.S. population will be watching some digital TV by 2019.
- Magid reported that 75% of those watching
TV shows and movies online reported doing so through subscription vs. 68% through free sources, and that eight in 10 of those who stream content to their TVs reported watching original series from
paid (SVOD) services. However, other data indicate that the ad-supported segment is the fastest growing one. Roku has reported that to be the case on its platform, where ad-supported channels make up
more than half of the top 250 most-watched channels. While overall U.S. ad-supported OTT penetration numbers appear difficult to obtain, internal data from the (OTT-focused) Tru Optik platform
indicate that about a third of U.S. households, or about half of U.S. connected TV households, watch some ad-supported OTT each month.
- Tru Optik estimates that OTT represented
about 1% of total TV ad spending in 2015, and is now between 2% and 3%. That would obviously represent rapid growth. But PwC’s Global Entertainment and Media Outlook 2016-2020 projects that by
2020, online TV will account for $5.4 billion, or just 6.6%, of a total $81.7 billion in TV ad spending. In fact, PwC noted that this year’s forecast put online TV advertising revenues’
CAGR at 8.9%, well below the previous year’s forecast of 14.4%. (At the opposite extreme, in 2015, Diffusion Group predicted that OTT ad revenue will reach an eye-opening $40 billion by 2020, to
represent fully half of its projected $85 billion in total TV ad revenue.)
- Meanwhile, PwC sees broadcast and cable advertising plugging along, with broadcast networks forecast
to experience an advertising CAGR of 3.9% and cable networks 3.7%.
- As for addressable TV, e-Marketer estimates that ad spending was about $890 million in that segment in 2016,
and will reach a fairly modest $2.2 billion by 2018.
At the same time, PwC’s analysts stated what is no secret to anyone in the business: “The TV advertising industry is
adjusting to a decline in linear audiences, as viewership shifts to OTT and online video services across a range of devices.”
And Magid Advisors president Mike Vorhaus has asserted that
connected TV, with its “mix of big screens, digital content depth and affordable connectivity hardware,” is “beating live TV at its own game…. Connected TV combines the
flexible targeting of digital with the engagement of live TV. Buying connected TV inventory is looking more and more like buying live TV, and that’s a home run for savvy advertisers.” In
short, he declared, “Connected TV is the new TV.”
Lot's of stats to chew on Karlene---thanks.
A few more, culled from Nielsen's Third Quarter 2016 online reporting provides additional light on this subject. For example, taking "linear TV", including delayed viewing mostly on DVRs, 93% of Nielsen's panel members tuned in at least one "TV" show per month, while only 30% did so via "multimedia devices"---Roku, Apple TV, etc. In terms of frequency of viewing, if we combine multimedia devices and linear TV, an average 18-24-year-old in Nielsen's panel devoted 87% of his/her total weekly consumption to "linear TV"; this percentage rose slightly to 88% for the 25-34 age group and more dramatically, to 93% for the 35-49 segment.
This, once again demonstrates how misleading overly broad "demos" such as adults aged 18-49 can be when evaluating their media usage patterns. I'm sure that the figures for "scripted" primetime entertainment shows on the broadcast TV networks relative to "multimedia device" usage will narrow the overall gap to some degree, however news, sports, talk shows, variety shows,movies, syndicated "off-network" fare, documentaries, game shows, newsmagazine shows, cooking shows, reality shows, etc. represent a majority of the TV consumption of 35-49-year-olds; moreover this very large portion of the 18-49-year-old population out views the 18-24s by about a two-one margin overall. So whether "connected TV" is 'beating live TV at its own game", remains to be determined. So far, it represents a fairly small---but growing---percentage of total TV viewing activity, and is not a major factor for adults over the age of 34. The millennials, who are into OTT to a much greater extent than those aged 35+ are, as a group, very light users of TV content, generally and this spills over to "multimedia devices" as well.