Not only are the TV distributor end-user revenues under pressure, but seismic changes in advertising are magnifying the crisis for the traditional TV business model. TV distributors and broadcasters must work together to orchestrate a defense for the advertising revenues.
Overall, the $500B TV/Video market revenues stem from a combination of end-user and advertising revenues in a split 60/40. In the US, the consumer payments mainly go directly to the pay TV operator whereas in Europe, the user payment is split evenly between license fee, paid to public service TV, and Pay TV. Now, both the end-user and advertising revenues are severely under pressure. Most obviously, the end-user payments are challenged due the entry of streaming and OTT providers such as Netflix.
The end-user revenue challenge for the TV business seems inevitable even though Comcast recently announced a small subscriber base increase. However, as users watch proportionally more TV on other devices and enjoy the pleasures of time-shifted TV, then the current advertising model also comes under pressure. This is already the case and a seismic change is building up as the viewing of linear TV has lost significant relative importance without the advertising revenues so far having been adjusted accordingly. New evidence, however, show that online video outlets finally start to chip away at TV's hold on advertisers. Starcom MediaVest, a big ad-buying firm, said it shifted more than $500 million out of TV over the past 12 months, three quarters of which went to online outlets.
Ultimately, the TV advertising business model will need to transform into a model similar to the online model. Today, viewership data is calculated as the average viewership for the commercial time within the program and the metrics C3/C7 refers to the ratings for average commercial minutes in live programming plus three/seven days of digital video recorder playback.
Recently, Comcast, in the US, has been rolling out the ability to dynamically insert updated ads into on-demand TV (Dynamic Ad Insertion also called DAI) and jointly with Nielsen, they have developed a new metric called On-Demand-Commercial-Rating (ODCR) which includes viewing of on-demand TV. This has been made possible through cooperation between Comcast Cable TV and NBC – also owned by Comcast. There are examples of similar developments around the globe and actually some of the first implementations surfaced in Europe with Virgin Media. Currently, Kabel Deutschland and RTL are running a similar project in Germany.
The projects are important steps in the direction of transforming the TV business model. On the US market, distributors have traditionally been involved in advertising and with Comcast pushing ODCR and DAI implementation, European broadcast and distributor executives can learn from the US experience. In any case, on a country-by-country basis, TV distributors and broadcasters must work together to orchestrate a defense for the advertising revenues.
Overall, the $500B TV/Video market revenues stem from a combination of end-user and advertising revenues in a split 60/40. In the US, the consumer payments mainly go directly to the pay TV operator whereas in Europe, the user payment is split evenly between license fee, paid to public service TV, and Pay TV. Now, both the end-user and advertising revenues are severely under pressure. Most obviously, the end-user payments are challenged due the entry of streaming and OTT providers such as Netflix.
The end-user revenue challenge for the TV business seems inevitable even though Comcast recently announced a small subscriber base increase. However, as users watch proportionally more TV on other devices and enjoy the pleasures of time-shifted TV, then the current advertising model also comes under pressure. This is already the case and a seismic change is building up as the viewing of linear TV has lost significant relative importance without the advertising revenues so far having been adjusted accordingly. New evidence, however, show that online video outlets finally start to chip away at TV's hold on advertisers. Starcom MediaVest, a big ad-buying firm, said it shifted more than $500 million out of TV over the past 12 months, three quarters of which went to online outlets.
Ultimately, the TV advertising business model will need to transform into a model similar to the online model. Today, viewership data is calculated as the average viewership for the commercial time within the program and the metrics C3/C7 refers to the ratings for average commercial minutes in live programming plus three/seven days of digital video recorder playback.
Recently, Comcast, in the US, has been rolling out the ability to dynamically insert updated ads into on-demand TV (Dynamic Ad Insertion also called DAI) and jointly with Nielsen, they have developed a new metric called On-Demand-Commercial-Rating (ODCR) which includes viewing of on-demand TV. This has been made possible through cooperation between Comcast Cable TV and NBC – also owned by Comcast. There are examples of similar developments around the globe and actually some of the first implementations surfaced in Europe with Virgin Media. Currently, Kabel Deutschland and RTL are running a similar project in Germany.
The projects are important steps in the direction of transforming the TV business model. On the US market, distributors have traditionally been involved in advertising and with Comcast pushing ODCR and DAI implementation, European broadcast and distributor executives can learn from the US experience. In any case, on a country-by-country basis, TV distributors and broadcasters must work together to orchestrate a defense for the advertising revenues.
