Commentary

OTA Fastest-Growing Acronym In Premium Video Advertising -- NOT OTT

by Dave Morgan , Featured Contributor, January 17, 2019

Heroes & Icons, Bounce, Escape, Laugh, Grit, Comet and MeTV. Do you know those TV network brands? You should. Millions of viewers across the U.S. are now watching those networks and their over-the-air brethren on a daily basis, and they are growing fast.

OTT (over-the-top) and CTV (connected TV) may be the buzziest three-letter acronyms in the world of video advertising today, but neither of them have the audience nor ad-load scale that OTA networks are enjoying today. The only difference is that OTA is happening under the radar.

When commercial television took off in the U.S. in the 1940s, it was a pure broadcast service, delivered over the airways from station-owned transmission towers to home- and set-based antennas. Over the succeeding decades, pure broadcast was superseded by cable, satellite and teleco delivery for the vast majority of U.S. homes. At that point, pure OTA delivery became a largely forgotten and ignored portion of the TV ecosystem for many in the ad community.

On June 12, 2009, all TV broadcasters flipped the switch from analog to digital and everything began to change. TV stations were assigned new bandwidth that multiplied the number of channels they could broadcast, the digital TV antenna was introduced, and some very entrepreneurial companies and executives started new national TV networks by cobbling together these multicast digital positions from the different local stations.

While some time passed for these efforts to reach critical mass, we wait no more. In a just-released study, Nielsen reported that there are now 16 million OTA households in the U.S., up 50% over the past eight years and at an accelerating growth rate.

Check out “TV antenna” on Google Trends. Searches for the term are up 4X over the past eight years.

Why? A particularly fascinating finding in the Nielsen report is that a significant segment of OTA viewers also subscribes to a streaming video service, apparently using OTA networks to complement their viewing on Netflix, Hulu and Amazon Prime to fill the gap when they “cut the cord” on cable.

While there has been so much attention paid -- appropriately -- to all of the many initiatives to sell new paid subscriptions streaming video services, from Disney + to Hulu to planned services from AT&T and NBCUniversal, there hasn’t been nearly as much attention on the many successful efforts to build up valuable, ad-supported services on OTA. I’m sure this is going to change fast.

These networks are free to viewers, so their ad load represents a real growth opportunity in the premium video advertising space at a time when more traditional broadcast and cable networks are losing audience and ad load.

Just over a year ago, local broadcast station owner E.W. Scripps bought Katz Networks (the owner of OTA nets Bounce, Grit, Escape and Laff) for $302 million. Today, Katz is already the fastest-growing portion of the Scripps business and last month announced that it had bought the brand and assets of Court TV to relaunch it as a new OTA network.

Just yesterday, the country’s largest TV station owner, Sinclair, announced the launch of STIRR, a free, ad-supported streaming video service that will aggregate content from many of these OTA channels. Sinclair already owns OTA brands like Comet and Charge! and cable programmer Tennis Channel.

There's no question that OTT and CTV are three-letter acronyms that deserve your attention. But if you care about the future of premium video advertising, you should be paying even more attention to the world of OTA. What do you think?

television, tv

6 comments about "OTA Fastest-Growing Acronym In Premium Video Advertising -- NOT OTT".

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Ed Papazian from Media Dynamics Inc, January 17, 2019 at 6:07 p.m.
Interesting question, Dave. As it happens, Nielsen projects the percentage of TV homes using OTA plus one or more SVOD services at 8% and within this fairly small universe, broadcast TV totally dominates, pulling average minute ratings that are triple its national average. So the questions are, )1 how much larger will OTA/SVOD penetration get? and 2) what types of content can be made on a profitable basis but geared only for this small segment of the total population?

On the first count and based on the trends, it's possible that OTA/SVOD penetration might peak at about 15% but it will take some years to get there. And the broadcast TV networks will, no doubt, be trying to find new ways to monetize this audience---presumably via their own SVOD offerings. On the second point, I find it difficult to believe that a quality content service can work if targeted only at such a small base. It seems to me that any new service, whether it be local news-oriented, or sports, or something else, needs to capture a fair amount of "pay TV" audience in order to survive in the ad-supported mode.

At this point, I believe that OTT is racing twoards a major shakeout----and disruption---as there are too many players and types of "bundles" being offered, many on money losing terms. While now may seem like the ideal time to jump in with the TV, movie and digital biggies, it might be prudent to se how they make out vs. Netflix and how the ad-supported platforms do, in particular, before diving in and hoping for the best. Danger lurks when such a high degree of volatility is just around the corner. Just my opinion, of course.
Reply

Ed Papazian from Media Dynamics Inc, January 17, 2019 at 6:21 p.m.

Correction on the point made in my first poaragraph. Broadcast TV doies not domiate in the OTA?SVOD segment, but does about the norm there in terms of viewing. Needless to say broadcast TV does dominate, as I described, among OTA homes that do not have SVOD---about 6% of the population.

Mark Romeo from Just Romeo, LLC, January 18, 2019 at 2:48 p.m.

Not sure that I buy into this. This is also the low end of the market. Similar to dial up, its a market, not going to generate significant revenues that moves the needle for anyone. Netflix will have an ad-supported model becuase they have to, they cannot continue to raise prices. Look for permission based advertising that is coded in broadcasts to be delivered to consumers based on permission. That is the next HOLY GRAIL. GPRR compliant and on-demand advertising which is what younger consumers want and demand. I would love to talk to you more about this. Cheers, Mark

George Wright from Self, January 18, 2019 at 4:18 p.m.

OTA Stands for "Over The Air" for those who don't know. (A lot of people don't.)
I am a viewer.
What do you mean by "premium"? My guess is that CPMs are at the bottom of the barrel.
I admit I haven't investigated any rate cards here.
My anecdotal observation leads me to stack rank advertisers as follows:
#1 - Cable Companies! The biggest "competitor" to OTA.
#2 - Pharmaceuticals
#3 - Direct Marketers
#4 - Ad Council
In addition to the channels you list, I find it useful for Local News.
I cut the cord about ten years ago. Almost everyday, I get a piece of direct mail from Spectrum (TWC) reminding me that they are there. I haven't forgotten.

Dave Morgan from Simulmedia replied, January 19, 2019 at 8:23 a.m.

Very good points Ed. One of the areas that the new OTA nets have exploited is library content. With all of the focus on original content development at Netflix, Hulu, Prime and top cable nets, this has given an opening for small nets to pick up and distribute library content. Heroes and Icons has Star Trek every night, and is driving significant viewership from it, certainly when compared to OTT networks and the pure digital video world (YouTube and Facebook).

Dave Morgan from Simulmedia replied, January 19, 2019 at 8:27 a.m.

George, your assessment is on target. Today, the CPM's of the digital OTA nets is pretty low, but mostly because Nielsen ratings is a relatively new phenomina for them (passive people meters in the local sample) and because they don't have much in the way of dedicated sales organizations. However, their content is as good as most of what is watched on the mid-tail of cable, so their rates will go up, for sure once they drive more local ad sales.