Where Is The TV/Video Ecosystem Headed? Thoughts From Disney, Discovery, Dentsu, Ampersand

No doubt about it: Marketers are frustrated by more than a few aspects of the rapidly evolving video/television ecosystem. But they’re also seeing real progress toward long talked-about capabilities, like actual addressability. 

One current source of concern is the shrinking mass linear television audience as viewers migrate to streaming services, combined with a dearth of streaming services that take advertising, said executives on a “view from the top” panel at VAB’s recent Video Leadership Summit. 

Netflix has been bringing the ad-free experience to millions of viewers for 10 years now, and “there’s a lot of streaming viewing but not a lot of streaming advertising,” said Jon Steinlauf, chief U.S. advertising sales officer for Discovery. “So I think there are opportunities for media companies to get into the market with an ad-supported model and replenish some of the challenges we’re facing in linear in C3.” 



Lisa Valentino, executive VP client and brand solutions for The Walt Disney Co., said that “we’re only in the first inning, and many more streaming brands will be coming.” But early learnings from Disney+ “blew us away,” and demonstrated that the value of streaming can go well beyond subscriber revenue alone. 

Disney believes that the 28 million subscribers garnered in a very short timeframe were not responding to the ad-free environment but to the content. “It showed us that content is alive and very, very healthy,” she said. “We launched a lot of new programming for the Disney+ launch, including ‘The Mandalorian,’ but folks who tuned into that watched 10 other things as well. It is not a one-in and then out scenario.” 

“We disrupted ourselves with Disney+, and we get to sit on both the ad-supported and not ad-supported sides of the equation,” she added. “The biggest benefit, frankly, is the data we capture on those subscribers and how that becomes the underpinning of our data business, and addressable business across linear. But digital audiences are also growing, so it’s not just about a declining linear business. It’s about a shifting business and how do we take advantage of that, and what are the barriers to that.” 

“There’s a lot of doom and gloom—I’ve read that there are now more subscribers to streaming services than to pay TV—but I think there are a lot of opportunities that marketers haven’t taken advantage of in the ad-supported advanced TV options out there,” said Doug Ray, chairman of media and U.S head of media at  Dentsu Aegis Network. “Hulu, Roku and other OTT services do take ads, and offer a lot of opportunities to reach viewers spending less time on linear but still very interested in our clients’ brands."

Dentsu Aegis is “spending a lot of time trying to solve some deficiencies in the marketplace by helping clients understand the holistic view of video across ad-supported platforms,” he said. “The platforms and technology used for years to plan and buy video skew toward linear only. So we’ve had to invest in building technology that allows us to look at simple things like unduplicated reach across multiple platforms. When you start to include OTT, CTV, addressable television, what’s the increase in unduplicated reach among consumers? We need to know, because we know that that unduplicated reach correlates to household penetration, which correlates to incremental sales." 

“But there aren’t enough clients seeing the holistic opportunity. They’re still focused on the CPM of OTT or addressable, and saying, ‘That’s too expensive versus cable or other channels.’ That’s looking at this the wrong way.” 

“First, we need to stop thinking about streaming as something different than pay TV,” argued Nicolle Pangis, CEO of Ampersand. “Streaming services are both television, but delivered differently… We need to get out of our own way and stop complicating the conversation. In advertising, the conversation is always: How does a brand reach a current or potential consumer? End of story. That is what we need to focus on.” 

The bottom line is that brands must be able to reach their current or potential audiences as consistently as possible, with scale —and precious few individual streaming services at this point have enough scale to be relevant in and of themselves to any major brand, Pangis said. 

“The benefits of TV have always been broad reach and highest- quality content; the benefits of digital have been ability to bring data to the table to target audiences better, more consistently at scale and then measure on the back end. What we’re seeing now is that streaming services combine the best of television with the best of digital through set-top data. So it’s going to be a marriage of all these things.” 

Ampersand’s owners, Comcast, Cox and Charter, “have access to a ton of streaming inventory, despite being traditional cable operators,” she noted. “So there’s a lot of cross-platform in the marketplace. And brands are going to be able to lean into where they can find a consistent target audience with as much measurability as possible on the back end.” 

Streaming services like Disney+ that offer easy usability and a consistently excellent user experience, along with high-quality content, will continue to grow, she said. “And Disney will figure out how to deliver those audiences to brands.” 

“It’s not an either/or,” added Disney’s Valentino, stressing that the industry should learn from digital’s mistakes on the accountability front and take care not to “race the [streaming] business to the bottom.” 

“What’s powerful in both linear and digital is how we can connect content and audiences at scale,” she said. “We’re in the early stages of what that looks like—how to measure it, what’s the accountability. But when we can come to the table with data capability, scale, brands that actually break through, and assets like parks and experiential, you have a very different posture with a client. You’re solving for a very different problem. Data and measurement are very important, but for us, it has to connect back to our core.” 

“Data’s coming and addressability’s coming, but the consumer experience with ads is very important for everyone in the TV advertising and media business,” said Steinlauf. “I think what’s coming is lighter ad loads — a five- or six-minute standard in streaming — and very targeted advertising that’s relevant to the viewers.” 

But all premised first on offering targeted content. “At Discovery we’ve got a 60,000-episode television library… and if we fire up a good algorithm on that, we can make the experience much more personalized for the individual viewer,” he said. “Deliver content for animal lovers, or car or food lovers." Per-month costs for such a lower-ad load, quality-content offering will probably fall in the $6 to $8 range, he predicted.

“But the linear business isn’t going away,” he emphasized. “We have $5 billion in linear advertising at Discovery, based on 87 million homes subscribing to either traditional or virtual cable bundles. That business will stay pretty healthy. It’s going to be a struggle for advertisers [of products targeted to women] because so much of the audience is shifting to sitcoms and movies via streaming. The country’s going to be split between sports households and non-sports households. I think the sports households will stay in the big bundles and those [big-bundle subscribers]  will probably fall down to 65 million or 70 million over the next five years. But you’re going to see this dramatic shift in 50 million homes, because — not to over-generalize — where females control the TV sets, there’s not as much of a need for the bundles. We’re moving toward a country where some people will just shop the apps and be fine with that, and others will want to have the big bundle, mainly for sports and news.” 

For Disney, “it’s not necessarily about lighter ad loads but different ad loads,” said Valentino. “We spend an enormous amount of time talking about ad innovation—we’re pioneering so many formats on the content side, but by far the bulk of ads out there are still traditional formats. Premium ad environments across all of these screens should be as differentiated as the content.” 

Ray pointed out that heavy ad loads result from inventory scarcity, and that the only way to lighten the ad load in linear while maintaining media owners’ revenue is to enable more available inventory. 

So the agency is talking with big media companies about “moving away from considering reaching the audience within a very narrow footprint of where the content is available,” he said. “Where are streaming opportunities, what are some of the other video formats and opportunities within a portfolio, and how do we think about those ads traveling across those? Then the yield will be there for [the media owner] but the experience will be better because the ad load within a particular component of that ecosystem will be less.” 

“Individual product sets by individual networks are not going to solve the consumer experience problem,” said Pangis. “We need to determine what deduplicated reach across all the buys that are happening for a brand look like, where the under-exposed audiences across all of those networks and streaming services are, and then fill in the gaps from there. This isn’t going to be an individual supplier situation. This is going to be looking at holistic set-top box data—holistic views of an audience.” 

Pangis stressed that TV remains the best way to build brands. “We should continue to use TV’s broad reach, then fill in the gaps with addressability. You can’t interact with an audience that doesn’t know your brand exists. If we start spending more money on targeted advertising than brand building, I think we’re going to have an industrywide problem.” 

Ray agreed wholeheartedly. “We as an agency have data and technology today not to silo or necessarily precision-target, because we have clients that need to reach large audiences. There’s a role for audience-based targeting, but we don’t have to narrowcast. We can target all category purchasers. We can build a propensity model that ensures we’re reaching those with the greatest likelihood of buying a brand’s products."

“What’s most important is that there’s massive unawareness of what’s happening in the linear space, where we can use data and technology as a complement. We’ve looked at more than 50 different linear client campaigns, and on average, we’re seeing 80% of their impressions going to about 25% of U.S. households."

“The conversation is not suddenly let’s move away from linear; it’s how do we use other technology and data to in-fill and complement; to extend reach and reduce excessive frequency. Advanced TV and addressable are really helping us to say ‘Let’s not target a narrow audience; let’s target the category purchasers who are light linear viewers, and we will extend reach for no incremental dollars.’”

1 comment about "Where Is The TV/Video Ecosystem Headed? Thoughts From Disney, Discovery, Dentsu, Ampersand".
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  1. Ed Papazian from Media Dynamics Inc, March 3, 2020 at 10:51 a.m.

    A well done and balanced report, Karlene. Thanks. What some buyers who object to much higher CPMs on OTT platforms don't seem to understand is that as the amount of "linear TV" GRPs shrinks the reduced supply will force a major uptick in "linear TV" CPMs---especially on cable channels which have always been TV's bargain basement where pricing was concerned. But advanced cord cutting will change that. So get used to much higher CPMs in general because they are coming not only with AVOD but with "linear"as well.

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