State of the Screens #12


Welcome to the twelfth edition of State of the Screens. Keep the feedback and ideas coming as we continue the dialogue on the convergence of television and digital advertising.

1. ‘Game of Thrones’ Season 7 Premiere Shatters HBO Ratings Records

16.1m viewers tuned into the Game of Thrones premiere on Sunday.

% growth from 2016:
1) Total — ↑ 38%
2) TV — ↑ 27%
3) Streaming — ↑ 60%

Viewership for the premiere grew by 4.4m between 2016 and 2017.

How does this compare to an event like the Super Bowl?

Total Viewers:
1)
Super Bowl: 113m (7X)
2) Game of Thrones: 16m

Television:
1)
Super Bowl: 111m (11X)
2) Game of Thrones: 10m

Streaming:
1)
Super Bowl: 1.7m
2) Game of Thrones: 6m (3.5X)

Share from Streaming:
1)
Super Bowl: 2%
2) Game of Thrones: 37%


Click here for my full tweetstorm.

2. Netflix Surprises With Big Subscriber Gains, Shares Soar

Netflix blew away Wall Street expectations adding 5.2m subscribers vs. a projection of 3.2m. They beat the target by 63%!!!!

The stock is up 30% this year.

They have now broken 100m subscribers with more than half coming from outside the U.S.

Netflix has customers in 109 countries and 80% of the subscriber growth was outside of the U.S.

Revenue grew to $2.8b or roughly $9 per subscriber/month.

Assuming an average ad CPM of $25, an average user would have to watch 359 video ads per month to match that level of revenue.

Premium content. Netflix currently has $15.7b in content obligations and recently received 91 Emmy nominations.

3. Nielsen Total Audience Report Q1 2017

Nielsen released the data for Q1 with a specific focus on how each generation consumes media.

Time spent by platform in Q1 (2016 vs. 2017):
1)
Live TV — 4h 21m (↓ 5%)
2) Mobile — 2h 19m (↑ 40%)


Bottom line. People are spending more time in front of screens which is why you see 40% growth in mobile with only a 5% decline in live tv.

The challenge for advertisers is budgeting between the various screens.

4. The ad industry feels like Silicon Valley is killing creativity

The ad industry knows that they need shorter creative (6s, etc.), but isstruggling with storytelling in a compressed environment.

A few challenges:
1) Connecting w/ consumers — 
Creative executives worry that 6s is not enough time to connect with customers in a similar way to the 30sallotted in most TV spots.
2) Pricing for creative — Fixed costs for creating both formats is very similar. Will brands expect to pay less?
3) Pricing for ad spots — Do these spots cost 1/5 less to run? For example, if a 30s spot has a CPM of $25 does the 5s cost $5?

Quote from Jason Sperling — SVP, Chief Creative Development @ RPA.
“actors haven’t gotten cheaper. Production costs haven’t gone away.”

Quote from David Campanelli — SVP, Director of National TV @ Horizon Media.
“We know that most of the time the 15-second ad is less effective than 30. Not usually half as effective, but less effective,”

A good example of a 6s ad currently being tested by Acura:


5. The 25 Best Ads of 2017 (So Far)

AdWeek breaks down the top 25 ads so far this year.

12 of the 25 are video w/ format and length:
1)
The New York Times, “The Truth Is Hard to Find” — horizontal / 1m 6s
2) The Atlantic, “Am I Typecast?” — horizontal / 2m 51s
3) 84 Lumber, “The Journey” — horizontal / 5m 45s
4) Samsung, “Ostrich” — horizontal / 1m 50s
5) Coca-Cola, “Pool Boy” — horizontal / 1m 1s
6) Volvo, “Moments” — horizontal / 3m 11s
7) Apple, “Earth (Shot on iPhone)” — horizontal / 1m 1s
8) Nespresso, “Comin’ Home” — horizontal / 1m 1s
9) Hornbach, “Regret Nothing” — horizontal / 1m 7s
10) Jose Cuervo “Last Days” — horizontal / 2m 1s
11) PlayStation, “Gravity Cat” — horizontal/ 4m 18s
12) Connect Internet, “Ice Bucket Challenge” — horizontal / 46s

A few questions to ask while watching some of the best examples of storytelling in advertisng:
1)
How many of these stories fit into a 15s, 30s or 60s?
2) How many of these stories were shot and/or would be a good fit for mobile video (vertical, etc.)?

6. Pew Research Center: Local TV News Fact Sheet

Pew Research Center does a deep dive on the State of the News Mediawith a specific focus on local news.

Local TV station revenue normally follows a cyclical pattern based on the political cycle.

Station Revenue by year (TV only):
1)
2010 — $19.4b
2)
2011 — $17.9b
3)
2012 — $20.3b
4)
2013 — $18.4b
5)
2014 — $20.0b
6)
2015 — $18.5b
7)
2016 — $20.6b
8)
2017 — $19.8b*
9)
2018 — $21.1b*

Digital revenue broke $1b for the first time in 2016.

Air time dedicated to news continues to grow (hours per day):
1)
2003–3.7
2)
2008–4.6
3)
2013–5.3
4)
2016–5.7 (↑ 54% since 2003)


More on this topic. Local Advertising Revenues Will See Double-Digit Increases, Surpass $174 Billion by 2021

Top platforms for $174b local spend (% of total):
1) Direct Mail: $37.1b (25%)
2) Local TV: $20.9b (14%)
3) Online / Interactive: $18.6b (11%)
4) Newspapers: $16b (11%)
5) Mobile: $16b (11%)
6) Local Radio: $15.6b (10%)

7. Streaming services led by Netflix pile up 2017 Emmy nominations

57% (4 of 7) of the nominations for Best Drama aired on a streaming platform like Netflix and Hulu.

Netflix alone had the same number of nominations (for Best Drama) as broadcast and cable tv combined.

Most nominations by network:
1)
HBO — 111
2) Netflix — 91

Top investments in original content:
1) Netflix — $6b
2) Amazon — $3b
3)
HBO — $2b

8. How TV Tuned in More Ad Dollars: Digital Doubts, Drugs and Desperation

Networks try to sell 75–80% of their annual inventory during the upfront period.

Broadcast revenue from upfront ad commitments is expected to grow 3–4% this year.

Television ad revenue is projected to drop 1.4% in 2017.

How can overall revenue drop if commitments at the upfront grow? One possible explanation is that advertisers are moving more money into the upfronts and out of the scatter market.

Increase digital commitments:
1) NBCUniversal — ↑ 42%
2)
Fox — ↑ 40%
3)
Disney/ABC — ↑ 20%

More on this topic. Online Publishers Try Reducing Ads to Boost Revenue

More on this topic. ‘Yield isn’t everything’: How Turner shifted programmatic private

9. Gameday for Disney to Boost ESPN Growth

Disney continues to grow cable revenue despite subscriber declines.

How are they able to do this?
1)
Increase per month cost for channels like ESPN
2) Add provisions in contracts with cable companies that stipulate a minimum number of packages that must carry ESPN

The average annual price increase for ESPN is 5%.

Example scenario:
1)
Subscriber growth — ↓ 2%
2)
Monthly subscription cost — ↑ 6%
3)
Total fee revenue — ↑ 4%

10. Follow-ups from previous editions

1) Why CNBC International is shifting its video strategy to YouTube
2) ‘Views can happen by accident’: Publishers are thinking more about watch time — and YouTube
3) The Tipping Point of TV
4) How Important is the OTT Device Market if the ‘Future of TV is Apps’?
5) Sources: TV Networks, Including ESPN, Bracing For Drop In Ad Revenue For Football Games
6) Global online video consumption and advertising to increase by a fifth in 2017

State of the Screens #9


Welcome to the ninth edition of State of the Screens. Keep the feedback and ideas coming as we continue the dialogue on the convergence of television and digital advertising.

1. CNN thinks it’s figured out what a post-cable network looks like, and it’s betting $70 million on it

What is Great Big Story? A streaming video network that primarily creates 3–5 minute videos.

How is CNN involved? CNN recently invested $40m ($70m total) in GBS at an estimated valuation of $250m.

The average age for each network:
1)
CNN — 58
2)
Great Big Story — 27

Facebook and YouTube have been primary distribution channels up to this point.

What is GBS going to do with the capital? Creating content around the clock will be an immediate step.

Stealth cable network? The move to 24-hour content should get them added on streaming pay-TV services like Sling TV and DirecTV Now.

Their content currently reaches 30–60m people per week.

Users watching on a connected-TV have an average session of 38minutes.

2. Is six seconds enough time to tell a brand story? It is for Fox, the first broadcaster to follow YouTube’s ‘bumper’ lead

Background on 6-second video — In April 2016, YouTube released a 6-second “bumper format”.

The big debate — Does this format work? Can you deliver a message in 6 seconds?

Fox recently announced that they will offer the 6-second format through digital channels before making it available through linear tv.

Ad spots during 60-minute show w/ 16 minutes of ads:
1) 30-second ads — 32
2) 5-second ads — 192

What will happen to the ad pod? Are shorter ads dispersed throughout the content rather than the big chunks that we have today? Will that have a possible impact on ad avoidance?

A great example (h/t: @ali_jae) from Tide:


Quote from Joe Marchese — President, Advertising Revenue @ Fox Networks

“We are in the storytelling business, not necessarily the advertising business,” he said at a press conference at Cannes Lions. “We’re in the advertising business as long as it allows us to tell our stories to more people. When it becomes a detriment — when it starts to turn people away — it hurts our storytellers.

“Unfortunately we haven’t found the right mix of ad products yet, but one of the things we’re looking at is how to make the most of people’s time. We don’t have to use as much as possible; we can get creative and tell the message in a short form way.”

“It used to kill me” when someone would ask why TVCs had to be 30 or 60 seconds long. “I’d be like, because we trade tens of billions of dollars around it and we need standardization.”

3. Susan Wojcicki Has Transformed YouTube — But She Isn’t Done Yet

Ad revenue on YouTube is estimated to have grown 30% year-over-year to just under $6B.

Key passage:
Part of YouTube’s appeal to mainstream creators is its adoption by a generation of viewers for whom YouTube, Amazon, and Netflix are the new ABC, CBS, and NBC. As James Corden explained at the Brandcast, what makes The Late Late Show work was his epiphany that the program could be divided into highly shareable, fun-size entertainment. “I realized that I didn’t have to make a show for any time slot, because we had the internet,” he told the audience. “And more than that, we had YouTube.”

4. Exclusive — Amazon to charge $2.8 million for NFL ad packages

Amazon can sell 10 30-second spots during Thursday Night Football as a part of its recent $50m deal with the NFL.

100 spots total for the season.

Ad package cost comparison:
1) Amazon (2017 streaming) — $2.8m
2) Twitter (2016 streaming) — $2-$8m
3) CBS/NBC (2016 network) — $550-$590k

It is unclear as to what constitutes an “ad package” in terms of numberof spots.

5. Netflix tests pre-roll video ‘previews’ that are personalized to your interests

Netflix is currently running 30-second pre-roll ads promoting it’s own content.

This is the 2nd time that they have tested this feature and is similar to how HBO/Showtime both promote their own content prior to a show starting.

Could this be the groundwork for an advertising offering?

The average Netflix user watches 1h, 33m of content per day.

If we assumed a 16-minute ad load per hour (similar to TV), then each Netflix customer could potentially receive 48 30-second spots per day or336 per week.

At a $25/CPM that would generate $1.20 in ad revenue per day or$37.20 per month.

The most expensive Netflix plan is currently $11.99 per month.

6. TV’s Next Act: Targeting Ads at Yogurt Lovers and Home Buyers

Who is Zicam? Zicam is a cold and allergy relief brand.

What did they do differently? Zicam moved 60% of it’s television budget away from age/gender targeting and towards consumers most receptive to cold-medicine pitches.

What were the results? Zicam estimates an 8% lift in sales.

7. Snapchat is adding more big-name TV channels, including HBO

Time Warner (HBO, Turner, Warner Brothers, etc.) has agreed to createaround 10 original shows for Snapchat.

The deal is worth $100m.

Coming soon to Mrs. Screen’s iPhone Plus!

8. Apple Poaches Sony TV Executives to Lead Push Into Original Content

Apple recently hired away two key executives from Sony.

Big moves for Apple’s original content ambitions.

The two were responsible for such shows as:
1)
Breaking Bad
2) The Crown

9. With Yahoo Deal Done, Verizon Digital Network Steps Into Spotlight

Verizon recently finalized the acquisition of Yahoo.

Recent Verizon deals include:
1) Oath (Yahoo + AOL)
2) Comlex (joint venture w/ Hearst)
3) Awesomeness TV (joint venture w/ Hearst and Comcast)
4) NFL and NBA (streaming live games)
5) go90 (streaming service)

10. Vice Media Grips $450M Investment That CEO Says Raises Valuation to $5.7B

Vice announced a $450m funding round valuing the company at $5.7b.

Vice valuation compared to other media companies:
1) AMC Networks (53% more)
2) Sinclair Broadcast Group (65% more)
3) AMC Entertainment (73% more)

11. Follow-ups from previous editions

1) Brand safety — Facebook’s new ad tools will give a greater level of transparency
2) Streaming — Behind Cheddar’s wager on the future of TV news

State of the Screens #8


Welcome to the eighth edition of State of the Screens. Keep the feedback and ideas coming as we continue the dialogue on the convergence of television and digital advertising.

1. Inside The Weeknd’s $92 Million Year — And The New Streaming Economy Behind It

Streaming is now the dominant platform for music consumption.

Usage up 76% year over year per Nielsen.

Streaming revenue for Forbes Celebrity 100 up 119%:
1) 2015 — $177m
2) 2016 — $387m

Musicians make just under $0.01 per stream.

14 artists from the Celebrity 100 generated 1b+ streams in 2016.

Awareness from streams leads to more $ from touring. The Weekend parlayed 5.5b streams into a $75m tour advance.

Streaming subscribers by platform:
1) Spotify — 140m (+40m YoY)
2) Apple — 27m (+7m YoY)

More Spotify numbers:
1) 50m paying subscribers (36% conversion rate)
2) $3.3b in revenue
3) $500m in profit

2. Cable News Wars: Inside the Unprecedented Battle for Viewers in Trump Era

Fantastic cover!


Viewership growth for CNN/FNC/MSNBC in 2016:
1) Primetime — ↑ 55%
2) Daytime — ↑ 36%

Fox News gets 2X the affiliate fees compared to CNN/MSNBC. Will this change as viewership changes?

3. Fox Tries to Gain Leverage Over Affiliates on Live Streaming

Fox recently started a national 24-hour feed for Hulu Live TV subscribers that live in 70+ markets where Fox does not have an agreement in place with the local broadcast station.

Local broadcasters argue that Fox is offering 50% less than ABC/NBC/CBS for similar licensing agreements.

Negotiating leverage — The viewer is not missing out on Fox broadcast content (primetime shows, etc.).

NBC Chairman Bob Wright floated a similar idea in early 2000’s.

4. Time Spent Viewing Long-Form Video Has Strong Uptick In Q1

63% of time spent with digital video is long-form (20+ minutes).

Breakdown by platform (Q1–2016):
1)
Connected TV — 98% (83%)
2) Tablet — 81% (51%)
3) Smartphone — 55% (26%)
4) Desktop — 65% (35%)

Video is projected to make up 82% of all internet traffic by 2021.

5. TV Ratings: NBA Finals Is Most Watched Since 1998

Most watched NBA finals in 19 years.

Average for series (2016):
1)
Total viewers — 20.4m (20.2m)
2) Digital viewers — 434k

6. Hallmark Channel to Cut Commercials by More Than Half

Hallmark plans to run 5–7 minutes of ads per hour for “Chesapeake Shores” and “Good Witch” versus an average of 15 minutes for other shows.

This will make Granny Screens very happy!

The goal:
1) Improve customer experience
2) Increase ad rates

Turner recently cut ad load for “Good Behavior” to 5 minutes from 13.

7. What Behavioral Data Tells Us About the OTT Viewing Habits of Cord-Cutters

Interesting study from comScore based on 870 cord-cutting homes from their 12.5k household panel (7% of total).

Key insights for cord-cutters:
1) They watch 60% more streaming content than non-cord cutters.
2) They appear to have less of an appetite for traditional TV content.
3) They are likely to have a HH income of less than $75k.

8. Streaming TV quality sucks compared to broadcast. Here’s how the industry intends to make it better

Much of the conversation on cord-cutting is focused on consumers trying to save money.

Here are some drawbacks for high-end consumers:
1) Delay — Live content can be delayed by 30+ seconds
2) Choppy video — Digital cable is 60 frames per second vs. 30 for most streaming services.
3) No surround sound — Dolby Digital is not supported with most streaming services.

These are probably reasons why high-income consumers are adding streaming to their pay-TV service (see comScore study above).

9. Purina will finally be able to stop wasting cat money on dog people

Purina is testing an addressable TV (connected TV) solution made possible from a partnership between Nielsen Catalina and Innovid.

This combines purchase history from 90m+ households (Nielsen Catalina) with ad tech infrastructure from Innovid.

10. Riding In Cars With Alexa

Very cool! @AlanWolk placed an Amazon Echo Dot in his car to bring the latest in connected home tech to his 13-year-old Subaru Forrester.

Sneak peek. Coming soon to a certain 2005 Nissan Frontier 🙂

11. Follow-ups from previous editions

1) Measurement — Analysis Finds Nielsen Data Used By ModelersUndercounts TV’s ROI By As Much As 20%.
2) Streaming — Why Disney made a huge mistake by selling its content to Netflix
3) Digital — Snap’s Challenge: How to Grow Without Getting Awkward
4) Brand safety — Facebook Lets Brands Blacklist Publishers
5) Broadcast consolidation — Holy Moses! Ancient FCC Regs Aren’t Sacred
6) Cord cutting — The Winners and Losers of the Rise of TV’s “Skinny Bundle

State of the Screens #6


Welcome to the sixth edition of State of the Screens. Keep the feedback and ideas coming as we continue the dialogue on the convergence of television and digital advertising.​​

1. Television’s Last Stand

1,400+ words of must-read analysis from @AWolk on how a few decisions by networks and pay TV providers back in 2011 continues to limit their ability to compete in a cross-screen world. The goods news is that 95m people are paying for television and there is still time for a course correction.

First, what is TV Anywhere? Content that requires the user to login with their pay TV subscription. Think logging into your Comcast account to watch ESPN on your phone.

The problem started in 2011:
1)
Several pay TV providers launched TV Anywhere apps.
2) The networks responded by suing the pay TV providers claiming that their carriage agreements did not extend past the set top box.

The networks feared that none of the viewing on the TV Anywhere apps counted towards their ratings which were costing them money in the form of lower ad rates.

An easy way to think of this is that a viewer that switched from linear to mobile would generate $0 in ad revenue for the network.

Quick math. One hour of network TV generates roughly $0.70 per hour (network share) in ad revenue per viewer. If 1m viewers switch from linear to mobile, then that would drop ad revenue $700k per hour long episode.

What happened next:
1) In 2016, Nielsen released Total Audience Measurement (TAM) followed by Total Content Ratings (TCR).
2) Networks announced that they would not be using TAM/TCR out of a fear that it would lead to bad results going into the upfronts.

Old world — Viewers who wanted to watch Friends had to tune into NBC on Thursday nights at 8PM. Easy to sell ads against.

New world — Vewers might not start watching Friends until Saturdaynight, and then only watch half the show, finishing up on their iPad on Monday morning. Much harder to sell ads against.

Quote from Alan Wolk — Editor @ TVREV.
“Nielsen’s TAM and TCR may not be perfect, but the industry needs to stop waiting for perfect and start making changes immediately, before consumers walk away for good. It’s been six years, and we’re at a point where any money the networks stand to make by waiting for super accurate non-linear ratings is more than offset by the money they’ll lose as viewers abandon the system.”

What do networks/pay TV providers do next:
1) Adopt currency (Nielsen’s TAM/TCR) for non-linear viewing
2) Launch robust TV Anywhere apps
3) Replace set top boxes with well-designed apps
4) Kill the grid-based guide
5) Make every show available in video on demand (VOD)
6) Include streaming services (Netflix, YouTube, etc.)

2. LUMA’s State of Digital Media 2017

Presentation from @LUMA_partners annual Digital Media Summit.

Data is the new oil.

$2b in funding for ad tech and martech companies in 2016.

8+ acquisitions over $1b in 2016.

New media > Old Media. Revenue valuations for companies like Vox/Buzzfeed are 6X companies like Time/Newscorp.

3. Internet Trends 2017 Report

Presentation from Mary Meeker w/ @kpcb.

Time spent with mobile has grown 288% since 2011.

Mobile accounts for 28% of time spent but only 21% of media spend.

4. Roku’s CEO on Netflix, Amazon, Google, and the Future of TV

Key stats for Roku:
1) 48%
of streaming players in the U.S. 
2) 14m active accounts. 40% growth since last year.
3) 9b hours of content delivered. 70% growth since last year.
4) Advertising accounted for 75% of gross profit. 50% growth since last year.
5) 20% of smart TVs sold in 2017 will be powered by Roku operating system.

No original programming. This allows them to stay neutral when it comes to carrying streaming apps and marketing content.

5. Cheddar, The “Post-Cable Network,” Is Coming To Cable TV

Cheddar is a streaming based financial news network recently valued at $83m.

You can watch it on platforms such as Facebook, Twitter and Cheddar.com.

Fusion is a cable network (pay TV) carried by such carriers as Dish, DirecTV and Verizon FIOS.

Fusion will start airing content from Cheddar from 11 a.m. to 1 p.m.daily.

Smart — This opens up 60m homes that carry Fusion to Cheddars content.

6. How Much Should Live Viewing Really Matter To Advertisers?

Time shifting % for original scripted shows:
1) 40%
for cable
2) 20% for broadcast

Several studies have shown that 75% of commercials from DVR are skipped.

Viewership for The Big Bang Theory gained 28% (3.9m) when DVR/VOD viewership for the following 3 days was factored in.

7. Netflix to Hit 128M Subs by 2022: Forecast

Growth in 2016:
1) Netflix — ↑ 44%
2)
Pay TV — ↓ 2%

Total subscribers in U.S.:
1) Netflix — 51m
2)
Pay TV — 95m

8. Amazon-Apple TV deal shows tough road to cooperation for tech rivals

Apple will now carry Amazon video app on Apple TV.

The two companies have been negotiating since 2015 when Amazon stopped selling Apple TVs on Amazon.com.

Amazon is developing original content for kids.

9. The future (and present) of programmatic TV

Less than 2% of TV advertising is purchased programmatically.

This number is expected to double in 2017.

Projected advertising growth:
1)
TV — ↓ 0.5%
2)
Digital — ↑ 8.5%

10. Follow-ups from previous editions

1) Pay TV — AT&T offers DirecTV Now to Unlimited Choice customers for an extra $10 a month Link

State of the Screens #5


Welcome to the fifth edition of State of the Screens. Keep the feedback and ideas coming as we continue the dialogue on the convergence of television and digital advertising.

1. With Snapchat’s new 5-minute shows, it’s starting to look a lot like a TV network

Snapchat is working with networks like NBC, ESPN, Turner and A&E on “Snapchat Shows,” which are 3–5 minutes in length.

Revenue will be generated through advertising and split 50–50 with the content creator.

Each episode will contain three 10-second ads.

How does this ad load compare to TV?
1) Snapchat — 3 minutes of content + 30 seconds of ads → 14% of time w/ ads
2) Television — 44 minutes of content + 16 minutes of ads → 26% of time w/ ads

Every hour of video viewing on Snapchat will deliver less than 9 minutes of ads or 53% of the ad load of television.

Content from premium partners combined with original shows (Good Luck America, etc.) could provide Snapchat with a competitive enough offering to claim more screen time.
1) Good Luck America — 5.2m viewers per episode
2) E! News: The Rundown — 7m viewers per episode

NBC News has also signed up to produce the first daily news show for Snapchat.

2. Time To ‘Do More Digital’ — But Rationally, Not Blindly

Quote from Dave Morgan — CEO @ Simulmedia.
“Problems with viewability, fraud and bots have been just a few of the unintended consequences of doing more digital without really understanding what might happen if budgets for “programmatic” were increased tenfold without understanding where the inventory could come from — particularly CPMs that seemed too cheap to believe (and were).”

75% of viewing on Hulu is done through a connected television.

Recurring questions in this week’s edition:
1) How do we define “TV”? Is it about content or delivery?
2) How do we measure TV and digital together?

Nielsen Digital Ad Ratings (DAR) will be used to count every viewer of every ad on every device for Hulu campaigns moving forward.

Our thought. Look for Nielsen DAR to gain steam as more agencies and networks adopt it as a currency for linking television and digital advertising.

The major shift in advertising over the next five years will be the use of data to compare and optimize a brand’s investment between television and digital advertising.

3. Amazon TV Service Helps Starz, HBO Stand Out in Netflix Era

Amazon Channels is the closest thing to à la carte TV in the market.

80m+ Prime subscribers in U.S. ↑ 36% in one year!

Amazon considered launching a live TV service (Hulu Live, Sling TV, etc.) but chose to focus its engineers on building out the Channels product.

Smart. Live TV is crowded and this is white space where Amazon can carve out market share. Skate to where the puck is going…

Scale. The below example compares Up TV on cable versus streaming:
1) Cable — 70m+ homes through bundle — Primetime average is 200k+ HH
2) Streaming — 12m subscribers pay $4.99/month

4. Golden Age of TV Shows Signs of Cracks as Some Channels Give Up

MTV, A&E and WGN are all cutting back on high-end productions after failing to attract big enough audiences in an increasingly crowded landscape.

Peak TV. Last year a record number of original scripted programs were produced — a total of 455.

$11B — Amount Amazon and Netflix will combine to spend on content this year.

Ratings shift. Below are ratings growth/decline in Q1:
1) Dramas — ↓ 15%
2)
News — ↑ 22%
3) Sports — ↑ 6%

5. Dear Researchers: “TV” Refers To Content, Not Delivery Mechanism

What is TV? — Is content that was originally developed for TV, but delivered to the viewer via streaming “digital”?

Proper measurement is made even more difficult when we can’t agree on what is being measured!

Are original shows developed by Amazon/Netflix (The Crown, etc.) more like HBO shows (Game of Thrones, etc.) or 2-minute videos on Buzzfeed/YouTube?

Quote from Alan Wolk — Editor @ TVREV.
“More confusing still, is that many researchers insist that Netflix, Amazonand Hulu are “digital video.” This makes no sense either, as what those platforms are showing is still television — most of their content consists of network TV reruns. The original series they’re producing are also TV — professionally produced long-form programming. There’s no logical reason to lump them together with two minute Buzzfeed videos or YouTube UGC.

The fact that more and more television will be delivered in a time-shifted manner via digital devices also speaks to the need to make sure that we’re calling TV “TV”. It’s easy to show the decline of television by focusing on the falling number of viewers watching linear television, but as our friend Innovid’s Tal Chalozin pointed out earlier this week, it’s not that TV is failing, it’s just changing and adapting.”

6. Facebook’s New Tool Lets Publishers Use Its Data to Sell Video Ads

The program is called Audience Direct. It gives publishers the power to sell their own ad inventory directly to advertisers, keeping their own ad tech infrastructure in place.

Audience Direct vs. Facebook Audience Network. Audience Network leaves most of the publisher infrastructure (relationship, ad stack, etc.) in place while Facebook Audience Network makes publisher inventory available to Facebook customers through Facebook infrastructure.

Quick math. Publisher inventory augmented with Facebook data for targeting should lead to higher CPMs.

Big picture. Facebook’s ad business is a monster that needs additional content in order to grow.

Additional content for Facebook #1: Facebook plans to spend up to $250k per episode of original content.

Additional content for Facebook #2: Facebook will stream at least 20Friday Major League Baseball games during the 2017 regular season.

7. Verizon CEO confirms company’s plan to launch a streaming TV service

The streaming wars have drawn another army to the battlefield!
1) Hulu Live — $40
2) DirecTV Now — $35
3) Sling TV — $20
4) PlayStation Vue — $40
5) YouTube TV — $35
6)
Verizon — TBD

go90 will be a separate service.

Could Verizon roll the go90 content (AwesomenessTV, etc.) into the live TV service?

If yes, then this would put them on more equal footing with Hulu who is combining original content (The Handmaid’s Tale, etc.) with a robust live TV lineup.

Verizon also has the rights for mobile streaming of NFL games.

8. Viacom’s Bob Bakish: Entertainment-Only Pay TV Option Coming This Year

Entertainment pack. No sports. Priced between $10-$20.

Quote from Bob Bakish — CEO @ Viacom.
“The transformational opportunity is to bring in a new entry segment at a much lower price point,” Bakish said. The industry needs “a path to bring in someone who wants high-quality entertainment” but doesn’t want to pay for sports channels. With a truly low-cost entertainment option, MVPDs can also offer more flexibility to consumers to “trade up from and trade down as the household needs change.”

9. AT&T’s Vision of TV: ‘Game of Thrones’ in Mobile-Size Bites?

Targeted advertising could lead to higher revenue and fewer commercials.

AT&T already uses data from 150–200 billion ad spots to sell more targeted/expensive ads.

AT&T and Time Warner combined could reach 1 trillion impressions per year.

Quote from Randall Stephenson — CEO @ AT&T.
“I’ll cause Plepler at HBO to panic when I say this,” Mr. Stephenson said, referring to HBO Chief Executive Richard Plepler, “but can you begin to think about things like ‘Game of Thrones’ as an example, where in a mobile environment, a 60-minute episode may not be the best experience. Should you think about 20-minute episodes?”

10. MSNBC scores a primetime cable news ratings sweep for the first time ever

News viewership continues to explode.

Primetime viewership for May 15–19
1)
MSNBC — 2.44m viewers
2) Fox News — 2.41m viewers
3) CNN — 1.65m viewers

11. Follow-ups from previous editions

1) Cord cutting — Cord-cutting explodes
2) Upfronts — There was something missing from the TV industry’s sales extravaganza

State of the Screens #3


Welcome to the third edition of State of the Screens. Keep the feedback and ideas coming as we continue the dialogue on the convergence of television and digital advertising.

1. Netflix and Facebook seem to share a crucial thesis about the future of TV shows

Both Facebook and Netflix are currently funding their video ambitions with a single revenue model (subscriptions or advertising) as opposed to the dual revenue model followed by broadcast/cable networks and other streaming competitors such as Hulu and YouTube.

Facebook believes that it can offer a revenue split with content creators that will incentivize them to produce quality video without a large upfront guarantee.

This is where the market dynamics of addressable advertising kick in. Let’s assume the following:
1) Addressable Video CPM $ (cost for 1,000 impressions) — $100
2) Non-Addressable Video CPM $ — $25
3) Revenue Share — 70% for publisher and 30% for Facebook

The Facebook portion of the CPM $ ($30) could be greater than what the publisher currently charges without targeting. This is solely due to advertisers willingness to pay more to reach the intended target.


2. Fed-Up Advertisers Stop Paying More for Smaller TV Audiences

In order to grow revenue with a shrinking audience, networks continue to raise CPM $. This is irritating advertisers, but not quite driving them to change behavior yet.

Over the last 4 years:
– TV Ratings ↓ 33%
– TV Ad Prices ↑ 20%

$1.00 of impact 4 years ago now costs $1.79.

Quote from Dave Campanelli — Director of National Television @ Horizon Media.

“How many years can advertisers pay 10 percent over 10 percent over 10 percent — and just keep buying TV?” Campanelli asked — rhetorically, of course, because he had the answer. “You’re going to scare people away from the medium altogether, and it’s not like there aren’t big places to go spend your money in the digital world.”

3. What The ESPN Critics Are Missing

An excellent counter argument to the ESPN is dead theme w/ quartlery profit estimates @ various subscriber levels and monthly pricing ($7.21 + 25% price increase):
1) 80m subs — $1.4b — $2.0b 
2) 70m subs — $800m — $1.5b
3) 60m subs — $500m — $1.1b
4) 50 subs — $200m — $750m

The following 2 things can be true at the same time:
1) ESPN is a magical business and one of the greatest (legal) cash machines in existence.
2) The cash machine has driven up monthly cable bills to the point where consumers are exploring alternatives.​

Smart idea. ESPN keeps current subscriber model (in the short term), but launches direct to consumer product focused on super fans and specific sports/teams.

4. The Peak TV Bubble Hasn’t Burst, But It’s Leaking

Too many networks are producing too many original shows.

Interesting point of view. The glut of content from recent original shows is creating a significant enough library on Netflix/Amazon that consumers may go there first and become conditioned to waiting for shows.

5. Wall Street Fearing Fall of Pay TV as Internet Offers New Bundles

Netflix is streaming 250m hours of video daily, and YouTube is past 1b.

762k cable subscribers cut the cord last quarter. This is the worst decline to date.

Are price increases finally having an effect on cancellations?

I believe that cord shavers (lower cost plan) are a bigger short term problem than cord cutters (leaving pay tv).

Quote from David Zaslav — CEO @ Discovery Communications.

“Ultimately, there should be a bundle, like everywhere else in the world, that’s $8, $10, $12 and I believe that will happen. I think these overstuffed turkeys are going to end up being a challenge from a consumer perspective. And the consumer is going to say I would like to have an opportunity here.”

6. Facebook closes the gap on TV advertising

Facebook has grown revenue per user by 500% since 2012. Television (advertising only) has grown 4%.


A single digital network now generates 40% of the revenue/user that the entire television industry does from advertising. This is why some people think that Facebook could eventually be worth $1t.


Why is this important? Networks like Facebook and Google are growing both their user base and revenue/user which should lead to a further explosion of total revenue. The user base for traditional media has matured which leaves revenue/user as the primary path for growing total revenue. Think higher advertising CPM $ and higher prices for cable tv.

7. Fox Picks New Head of Ad Sales, Just as Selling Season Starts

Quote from Joe Marchese — President, Advertising Revenue @ Fox Networks.

“We’re having consumers sit through almost 20 times the ads in some cases as a YouTube or Facebook might over the same period — we’re not making 20 times the money,” he said. “There’s a misconception about where people are spending time with marketing messages, and I want to get that focused.”

8. Follow-ups from previous editions
1) $100B+ opportunity for advanced TV — Unpacking Omar Sheikh’s $100B Call On Future Of Data-Targeted TV Ads
2) Connected TV — Study: 69% of U.S. Homes Connect a TV to Internet
3) Streaming deals for local broadcast — CBS Sets Digital MVPD Distribution Pact With Affiliates

1. Netflix and Facebook seem to share a crucial thesis about the future of TV shows

Both Facebook and Netflix are currently funding their video ambitions with a single revenue model (subscriptions or advertising) as opposed to the dual revenue model followed by broadcast/cable networks and other streaming competitors such as Hulu and YouTube.

Facebook believes that it can offer a revenue split with content creators that will incentivize them to produce quality video without a large upfront guarantee.

This is where the market dynamics of addressable advertising kick in. Let’s assume the following:
1) Addressable Video CPM $ (cost for 1,000 impressions) — $100
2) Non-Addressable Video CPM $ — $25
3) Revenue Share — 70% for publisher and 30% for Facebook

The Facebook portion of the CPM $ ($30) could be greater than what the publisher currently charges without targeting. This is solely due to advertisers willingness to pay more to reach the intended target.


2. Fed-Up Advertisers Stop Paying More for Smaller TV Audiences

To grow revenue with a shrinking audience, networks continue to raise CPM $. This is irritating advertisers, but not quite driving them to change behavior yet.

Over the last 4 years:
– TV Ratings ↓ 33%
– TV Ad Prices ↑ 20%

$1.00 of impact 4 years ago now costs $1.79.

Quote from Dave Campanelli — Director of National Television @ Horizon Media.

“How many years can advertisers pay 10 percent over 10 percent over 10 percent — and just keep buying TV?” Campanelli asked — rhetorically, of course, because he had the answer. “You’re going to scare people away from the medium altogether, and it’s not like there aren’t big places to go spend your money in the digital world.”

3. What The ESPN Critics Are Missing

An excellent counter argument to the ESPN is dead theme w/ quartlery profit estimates @ various subscriber levels and monthly pricing ($7.21 + 25% price increase):
1) 80m subs — $1.4b — $2.0b 
2) 70m subs — $800m — $1.5b
3) 60m subs — $500m — $1.1b
4) 50 subs — $200m — $750m

The following 2 things can be true at the same time:
1) ESPN is a magical business and one of the greatest (legal) cash machines in existence.
2) The cash machine has driven up monthly cable bills to the point where consumers are exploring alternatives.

Smart idea. ESPN keeps current subscriber model (in the short term), but launches direct to consumer product focused on super fans and specific sports/teams.

4. The Peak TV Bubble Hasn’t Burst, But It’s Leaking

Too many networks are producing too many original shows.

Interesting point of view. The glut of content from recent original shows is creating a significant enough library on Netflix/Amazon that consumers may go there first and become conditioned to waiting for shows.

5. Wall Street Fearing Fall of Pay TV as Internet Offers New Bundles

Netflix is streaming 250m hours of video daily, and YouTube is past 1b.

762k cable subscribers cut the cord last quarter. This is the worst-decline to date.

Are price increases finally having an effect on cancellations?

I believe that cord shavers (lower cost plan) are a bigger short term problem than cord cutters (leaving pay tv).

Quote from David Zaslav — CEO @ Discovery Communications.

“Ultimately, there should be a bundle, like everywhere else in the world, that’s $8, $10, $12 and I believe that will happen. I think these overstuffed turkeys are going to end up being a challenge from a consumer perspective. And the consumer is going to say I would like to have an opportunity here.”

6. Facebook closes the gap on TV advertising

Facebook has grown revenue per user by 500% since 2012. Television (advertising only) has grown 4%.


A single digital network now generates 40% of the revenue/user that the entire television industry does from advertising. This is why some people think that Facebook could eventually be worth $1t.


Why is this important? Networks like Facebook and Google are growing both their user base and revenue/user which should lead to a further explosion of total revenue. The user base for traditional media has matured which leaves revenue/user as the primary path for growing total revenue. Think higher advertising CPM $ and higher prices for cable tv.

7. Fox Picks New Head of Ad Sales, Just as Selling Season Starts

Quote from Joe Marchese — President, Advertising Revenue @ Fox Networks.

“We’re having consumers sit through almost 20 times the ads in some cases as a YouTube or Facebook might over the same period — we’re not making 20 times the money,” he said. “There’s a misconception about where people are spending time with marketing messages, and I want to get that focused.”

8. Follow-ups from previous editions

1) $100B+ opportunity for advanced TV — Unpacking Omar Sheikh’s $100B Call On Future Of Data-Targeted TV Ads
2) Connected TV — Study: 69% of U.S. Homes Connect a TV to Internet
3) Streaming deals for local broadcast — CBS Sets Digital MVPD Distribution Pact Wit

State of the Screens #2


Welcome to the second edition of State of the Screens. We had a tremendous response from the first edition and look forward to continuing the dialogue on the convergence of television and digital advertising.

1. Here’s Why Skinny TV is Still an Experiment for Companies

Skinny bundles are the rage. One way to look at this is that 5 new national cable providers have launched in the past 2 years with a starting price under $40 compared to an average cable bill of $103.

Basic package cost by streaming cable provider:
Hulu Live — $40
DirecTV Now — $35
Sling TV — $20
PlayStation Vue — $40
YouTube TV — $35

Fox News has the highest prime time ratings on cable (2.5m) and costs the average cable subscriber $1.55/month. ESPN averages 1.9m in primetime and costs $7.86. The average cable subscriber pays 5X more per month for a channel that they are 30% less likely to watch.


What happens when the cable news channels start asking for highly monthly fees based on their increased ratings?

2. How Hulu Reinvented Itself For Live TV

Another entrant (#5) into the streaming wars.

The details for basic package:
$39.99/month
50 channels
50 hours of cloud DVR
2 simultaneous screens

75% of viewing on Hulu occurs on a connected TV which means they are well positioned for increasing share of time on the big screen.

Local broadcast is available in select markets similar to YouTube TV.

3. Twitter Announces 16 New Livestreaming Partners at Its First NewFronts Presentation

The plan is to stream live content 24/7.

More content. Twitter grew the total hours of content by 60% between Q4 and Q1.


16 additional sports, news and entertainment companies are going to start livestreaming on Twitter.

Bloomberg is launching a 24/7 ad-supported news network on Twitter.

This is continued momentum for Twitter following the announcement that they added 9m additional users in Q1.

4. Scripps Brings Local News To Amazon

Smart — Local news content is extremely valuable to local broadcasters and finding new distribution channels is huge.

I have found the news functionality on Alexa to be one of the greatest benefits of the product.

5. Facebook wants to launch its big attack on TV next month — here’s what we know

2 dozen shows at launch broken up into 2 tiers:
1) Premium/Longer form (30+ minutes)
2) Shorter length (5–10 minutes)

Facebook is facing some headwinds in getting traditional content producers to license video. Some have gone as far as to say “Apple 2012 = Facebook 2017”.

The revenue model for digital video is going in 2 distinct directions:
1) Ad supported (Facebook, Google, etc.) — These companies need more video inventory in order to grow. Creating your own content is one way to do this.
2) Subscription supported (Netflix, Amazon, etc.) — Some of these companies may generate revenue from advertising in the future but are currently focused on creating bundles that generate consistent monthly revenue.

What happens to the advertising industry if the wealthy consumers that are currently the most valuable advertising targets continue to move into non-ad formats for video?

6. What Google’s Newest Venture Says About the Future Of TV Ads

It is amazing that only 6% of television advertising in 2017 will be bought programmatically. A ton of room for growth considering how massive this industry is.

Question — What type of local broadcast inventory will they get access to?

A smart take from Bill Wise (CEO of Mediaocean) — “When we talk about winners and losers in a converged advertising ecosystem, we tend to focus on whether the traditional media players can function in a digital future. But the digital businesses will be disrupted by the coming convergence, too. For every time we ask whether the traditional businesses can go digital, we also need to ask whether the digital players can go linear. The answers to both questions will determine the future of the ads industry.”

7. Ad Spending Around Original Digital Programming Has Nearly Doubled in the Past 2 Years

The average media agency will spend $4.4m on video advertising for original digital video content — defined as being professionally produced for digital consumption — in 2017 which is up from $2.4m in 2015 (76% growth).

Question #1 — How does the rise of original digital content impact traditional media (broadcast/cable) attempts to distribute the content digitally? The impact of ad-free players like Netflix has been obvious, but what about others such as Verizon’s Go90?

Question #2 — Are we starting to see an impact in television ratings from the overall supply of original digital content (The Crown, House of Cards, etc.)? At what point does this truly become a substitute good where we are trading one hour of traditional tv for one hour of original digital content?

8. Must watch videos
1) Turner CEO Sees ‘Race to the Center’ in Advertising
2) Extended Interview: WPP CEO Sir Martin Sorrell
3) Launch of YouTube TV Could Result in an ‘Aggressive’ Pay TV War says Simulmedia’s DaveMorgan

9) Follow-ups from previous editions
1) Cord cutting — Pay-TV has its worst Q1 subscriber losses ever; analyst pegs total carnage at 762K
2) Pay TV bill growth — The Average Cable TV Bill Is Set To Exceed $140 By 2020
3) Broadcast consolidation — Sinclair Is Said to Be Near a Deal for Tribune Media

State of the Screens #1


Welcome to the launch edition of State of the Screens. Our goal is to summarize the top trends and must-read articles that touch on the convergence of television and digital advertising.

1. Oracle will pay more than $850 million for Moat

$850M!!! A huge win for software companies in the Ad/Mar-Tech space. My prediction is that we will look back on this as a bargain once they start to measure more pieces of the advertising space.

3 big questions every advertiser is asking
1) Was my ad viewable? (Oracle through MOAT acquisition)
2) Did my ad hit the right target? (Oracle through combination of MOAT/DataLogix acquisition)
3) Did my advertising drive sales? (Oracle through DataLogix acquisition)

Customer data > proxy demos. Advertising driven by customer data is the next big thing. You may think that everyone is transacting this way now, but the majority of advertising is still bought/negotiated/measured against broad demographics.
Link

2. FCC Reverses Obama-Era Limits on TV Stations’ Owners

Background — Previously stations groups operated under a regulation that capped them at 39% national audience share. This change should drive further consolidation.

Chart — I posted this on Twitter that showed the potential cap by broadcast group.


Immediate impact — More revenue opportunities for advertising as they are able to add more national brands as customers (larger footprint).

Long term impact — Improved economies of scale. Think combining local news (sports, etc.) for many markets into a national/regional product. Another idea would be further investments in data/tech such as user registrations to build out a direct relationship with consumers. Both moves make more sense when you have a larger footprint. Think Comcast and the X1 platform in the cable space. 
Link

3. Pay TV’s Pain Point Gets Worse: Cord-Cutting Sped Up in 2016

1.9m dropped pay TV in 2016. This trend is accelerating both in terms of raw number (1.1m in 2015) and as a percentage of total subscribers (2% in 2016 vs. 1% in 2015).

The good news. Streaming services (Hulu, etc.) added 900k subscribers in 2016.

The bad news. Even with the additional subscriptions from streaming, there were 1m net pay TV subscribers who cut the cord. Also, the average cable bill is $103/month which is well above most streaming packages.

The Trend. Average cable bill ↑ 4% ($103 vs. $99) and total pay TV subscribers ↓ 2% (95m vs. 97m). Cable TV still has inelastic demand, but price increases are starting to drive cord cutting. 
Link

4. The Biggest NFL Schedule Release Story Is Whether ESPN Gets Stuck With Bad MNF Games Again

Chart — I posted this on Twitter which shows the amount each network pays per year to air various NFL games.


ESPN is the big dog — They account for 35% of the total for all networks and near double the next closest (Fox — Sunday NFC).

$80/year — That is how much the average cable subscriber in the United States pays for ESPN in 2017. As of August 2016, there were 88.8M subscribers which mean that ESPN makes $7.1B/yearin subscriber fees or $592M/month.

100.1M subscribers — That is the peak total for ESPN back in 2011 which has fallen 11.3M (11%).

The Trend — NFL rights fees for ESPN (since 2013) ↑ 70% while subscription revenue from consumers (since 2011) ↓ 11%. The model for a network like ESPN was always to grow revenue (subscriptions, etc.) at a greater rate than content costs. The big question is whether they can find alternative revenue streams (advertising, OTT, etc.) to accomplish this goal. Link

5. A potential fight is brewing in TV land over an under-20-dollar TV bundle without sports

Chart — I posted this on Twitter which shows the pricing difference between the average cable bundle ($103) and the proposed non-sports bundle ($20).


Cord cutting vs. cord shaving — Most of the focus has been on consumers that cut the cord (no pay TV), but cord shaving (cheaper bundle) could be a bigger issue. What happens to the budget for content as consumers choose the $20 monthly price tag over the $103 version?

Sports is the primary focus here because networks have placed big bets on content as consumer media habits are changing. For example, the CBS/NBC/Fox are already locked up with the NFL through 2023. How do these networks monetize this investment if ratings slowly decline annually? Link

6. NBCUniversal signs deal with TV affiliates for streaming, TV Everywhere distribution

The good news. NBCU is setting a common financial framework so that each broadcast group can easily roll their content into current/future streaming services.

The bad news. Not much but the proof will be in how many local NBC affiliates end up in streaming packages because of this framework.

Video — Watch @nScreenMedia break down this deal.

Doesn’t the new YouTube service already offer this? Yes and no. They were able to secure rights in the large markets (Los Angeles, the San Francisco Bay Area, New York, Chicago and Philadelphia) where the national networks own the local stations. Link