• by Dick Wechsler , Op-Ed Contributor, December 31, 2014

Over-the-top (OTT) services have already been announced by Sony, CBS and Dish and will be launched beginning early next year. This will provide everyone the option to pick and choose the broadcast and cable networks we want. The universe of viewers who take the massive cable programming bundles today will begin to shrink.  

As a result, concurrent audiences will become smaller and the video — note I didn't say TV — advertiser will be more challenged to reach them. Of course, this won't happen all at once. The erosion of households away from the major MSOs, like Comcast and Time Warner, will be gradual at first.  But 2015 will be the year that the OTT beachheads begin to take hold.  Let the disruption begin.

Interesting, the rollout of OTT services is likely to have a positive impact on direct response marketers. Keep in mind the golden rule of direct marketing: “If the media is cheap enough, anything will work.” I predict that these OTT services will bring undervalued media into the marketplace.

Why? Because these services will have cable operator commercial breaks to sell to advertisers, just as is currently done by the multisystem operators like Comcast, Time Warner, DISH and Direct. In the case of the OTT services, however, the buyer, rather than the seller will drive the pricing of these ad units.  

The first people in will be direct marketers.  And, they will significantly undervalue the inventory until OTT subscribers grow and the general advertising market takes note – probably not until well into 2016 or 2017.

While the emergence of OTT services will affect the DR media market, so will the loss of viewership ratings.  Perhaps no market will feel the impact of this as greatly as syndication.  As the ratings of syndicated programming fall, it becomes increasingly difficult to deliver the GRPs demanded by the general advertising market.  That means that more ad units will go to audience deficiency units and that there will be less efficiently priced remnant inventory for the DR market.

While this trend may appear ominous on the surface, I believe it will have a positive overall impact on the DRTV market. The loss of ratings is going to make syndication less and less desirable to the brand marketer. I’m not sure where they are going to find the points they need to meet their awareness goals, but I’m pretty certain that it won’t be in syndication. 

So while the market will remain hotly contested for top shows, like “Wheel of Fortune,” “Jeopardy,” “Ellen,” and “Big Bang Theory,” it is likely to be soft for the rest of the syndication media market. A soft market always means opportunity for DR advertisers.

The On Demand ad market is also going to continue to grow for DR. Right now, the delivery numbers remain a bit too small for the general market. But, more and more DR advertisers are going to purchase on demand units. It offers them an efficiently priced way to reach their target, plus the contextual benefit of advertising in prime time programming to which they otherwise couldn’t afford.

Finally, while 2015 will be the year of OTT, it won’t bring the much-anticipated death of television.  Yes, we’ll all begin to group the media world into three silos in 2015:  video, audio and publishing.  But, broadcast, cable and satellite will continue to dominate the distribution of advertising supported video content.  

In turn, the media market is going to strengthen as the year unfolds.  The scatter market was pretty soft in 4Q 2014.  We see that continuing well into 2015, which is more good news for the DR marketplace.  However, it’s going to change faster than we anticipate. A soft scatter market usually means a soft upfront – but a soft upfront is often followed by an irrationally strong scatter market.

 

 

By 4Q ’15, the media market is likely to get very tight. Pricing in scatter may exceed levels that could have been locked down in the upfront. That’s bad for both general and DR advertisers.  As a result, general advertisers may want to take advantage of what is likely to be a relatively soft upfront market.  DR marketers that have limited windows of opportunity, like health insurers, may want to secure guaranteed inventory in 4Q as well.