Sharing Network Ad Inventory With Pay TV Inevitable

Big pay TV providers are increasingly integrating big standalone over-the-top services -- Netflix and the like -- on their set-top boxes. Where are the new deal points for these OTT deals -- especially when it comes potential advertising components?

As the trend broadens to other OTT efforts -- ad-supported platforms specifically -- the question is whether there will be advertising share/ad inventory deal points for Comcast, Charter Communications, DirecTV and others.

Recently, Charter joined some big pay TV providers in integrating Netflix; it is also in discussions with YouTube. Late last year, Comcast announced it was incorporating Netflix, the subscription video on demand service -- an advertising free service -- into its X1 set-top boxes. 

Then in February, Comcast made a deal to add the regular YouTube digital site, which does carry advertising. Currently, Comcast doesn’t share in any of these advertising revenues. We don’t know where Charter stands with its potential YouTube content deal.



We know from history cable companies -- as well as virtually all other pay TV providers -- typically get around two minutes of local advertising time to sell from a cable TV network. Will that be the same formula for new advertising deals for new ad-supported digital platforms?

Now flip the script.  Early reports -- since dismissed -- were that the live, linear TV service, YouTube TV, a virtual pay TV provider, would get a piece of advertising revenues and/or inventory to sell from TV networks -- just like cable, satellite, and telco pay TV providers have received.

No, that isn’t happening. TV networks will not surrender any more of their prized TV advertising inventory anytime soon. We can only assume, for the near term, these will be fee-based deals.

But down the road, TV-video deals for new digital services might want to grab more advertising revenues, either in pure ad-sharing arrangements or with specific advertising time allotted to sell.

It’s already happening. For its new live, linear TV service, Hulu will sell advertisers the local TV commercials, two-minutes per hour, on cable/TV networks. Hulu already sells local ad inventory of TV networks for its original ad-supported on-demand service.

Here’s why: In 2016, Comcast pulled in $2.3 billion in local cable advertising revenue up 10% versus the year before; Charter around $1.7 billion up 11% on a pro forma basis, which includes results from Time Warner Cable and Bright House Networks.

There’s still TV advertising money to be made -- for someone.

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