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.”
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.