Let’s say you're the CEO of a TV company. And let’s say eMarketer comes in and estimates that “total programmatic TV spending -- national, local, and OTT -- will hit $2.8 billion in 2019 and $4.7 billion in 2020.”
Here are a number of things that most surely will be going through your mind:
Number one: How do you accelerate this growth? It’s clear that advertisers -- your clients -- like the programmatic way of procuring ad time. So you’ll need to ensure that you offer it and have the right technology, people, relationships and data to pull this off.
That brings us to number two: You know that your company is becoming less and less advertising-dependent, but at the same time it can’t do without the revenue. The industry seems to agree that companies like CBS have decreased their ad income dependency to around 50% or slightly lower.
Income from content rights is growing fast, as Amazon, Netflix, Hulu, Roku — but also cable companies, mobile phone companies, social media networks and others — pay handsomely for content. The challenge in this model is that your content cannot be commercialized by your company through ad sales, as it appears on “someone else’s” platform.
At the same time, 50% of your revenue is still generated by good old TV ads on your own platform(s).
It’s also true that cable retransmission fees are coming down because cable and network TV attract smaller and smaller live TV audiences.
To make matters even more complex, it isn’t that total viewership is shrinking, it is shrinking on the platform that generates just shy of 50% of your revenues. Price increases on ads have made up for this in the past, but that isn’t an option going forward. Advertisers and agencies simply won’t accept it.
Your company has also decided to invest in launching its own VOD distribution platform, as that will generate another income stream for the content it already owns and distributes. However, this is obviously another investment before income — but could also be an opportunity to generate additional ad income.
All this leads to consideration number three: investment in people and technology. It’s clear you’ll have to invest before reaping rewards. So you’ll need to carefully balance your investment in these new opportunities versus the old way of making the green stuff.
How many salespeople will you need going forward? What is your plan to gradually reduce their numbers? Which skills do you need to retain within the ad sales function, and which skills can you dispense with? And can the investment cost potentially be offset by the reduction of the traditional of ad sales operation?
Are you going to let the same salespeople represent the new platforms to your advertisers and agencies, or are you going straight to an automated solution? And will this platform be an integrated or a separate offering in ad sales and ad cost?
And finally: How do you demonstrate ROI to advertisers when you only have fragmented data across some of the platforms where you offer your content? How do you convince them to buy into a platform if you’ve got no GRPs?
Is it time for lunch yet? This stuff is hard!