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Trading Of US Linear TV Advertising Shifting To Programmatic Trading

Technology Platforms For Monetizing Connected TV Has Lots Of Room To Grow

Overview Of Western Europe Multichannel Market In The Last Year

Are Local Sports Keeping Subscribers In Traditional Multichannel Bundles?

Studios, Exhibitors Set To Spar Over Streaming

Technology, Media & Telecom
Trading Of US Linear TV Advertising Shifting To Programmatic Trading

Oct. 08 2018 — Both buyers and sellers of traditional linear TV advertising, not including connected TV or over-the-top video, are moving toward the adoption of programmatic trading. In 2017, Kagan estimates that $690 million or 0.9% of total linear TV spend was traded programmatically. Within the next five years, that figure is expected to climb to $9.76 billion or nearly 12% of total linear TV advertising revenue. MVPDs are forecast to trade the greatest percentage of their ad inventory programmatically in 2022 with 30% of ad revenue from programmatic trading.

Kagan defines programmatic trading as being automated and data-enhanced, not just one or the other. Trading may be through a private or open marketplace and does not have to be through an auction, which is more common in digital video advertising.

There are several issues holding participants back from programmatic trading. Unlike digital programmatic marketplaces, where there is a seemingly unending supply of ad inventory, linear TV has a finite supply. Demand for TV inventory exceeds the supply, so there is still an attitude of "If it isn't broken, don't fix it." TV ads are also bought well in advance, not immediately.

While many agencies have experimented with the programmatic trading of linear TV, not all are on board. Many of the advertisers and agencies are interacting directly with the supplier platform rather than going through a demand-side platform, or DSP, today. In their experiments, the agency needs to use separate platforms to aggregate inventory and tie it together, which is a lot of work.

The lack of inventory is one factor holding back programmatic trading. The only way it takes off is to make linear TV inventory available in some type of buyer platform that can combine the various supply platforms. It is even more complicated when the buyer wants to bring in connected TV (OTT).

Agencies do like the automation capabilities of programmatic, particularly where the process takes a lot of time. An algorithm may do better in areas such as weighting estimation, the first pass at scheduling and the negotiation process as well as postings and billings. The process of buying inventory is not difficult, but computing where a buyer will be able to find its preferred audience is. Therefore, interest in automating the planning and analysis to find an optimal audience is high.

We forecast a gradual uptake for programmatic trading with continued testing in 2018. Broadcast stations and networks, cable programmers, and MVPDs need to add more inventory to programmatic platforms before agencies begin using it in earnest. It will take time for all parties to feel comfortable transacting in a new way.

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Technology, Media & Telecom
Technology Platforms For Monetizing Connected TV Has Lots Of Room To Grow

Dec. 19 2018 — In the advertising industry, ads for over-the-top video streaming to TVs either directly or via a device connected to the TV such as a streaming media player or a game console are referred to as connected TV ads. There has been an increasing number of streaming devices shipping worldwide, bringing more viewers to connected TV. Ad tech vendors have noted the opportunities provided by the growth in connected TV ad inventory and are expanding their own connected TV products and services for video providers and advertisers. Kagan expects U.S. connected TV ad tech vendor revenue in ad serving, demand side platforms, or DSPs, and supply side platforms, or SSPs, to grow from $129.1 million in 2017 to $654.4 million in 2022.

The growth in both ad-supported OTT video streaming services and their viewing has OTT providers and the advertising industry looking toward this segment as an important avenue to reach viewers. Unlike traditional TV, which has a finite amount of inventory, the more viewers the advertising OTT services reach, the greater the amount of ad inventory they have.

For advertisers, connected TV inventory brings the best parts of TV and digital advertising together with 100% viewability, 90% plus completion rate, reduced fraud and the ability to target audiences with 1:1 addressability. Brand or sales lifts from the viewing of an advertisement can also be determined by the advertiser. In addition to addressability, part of advertiser interest in connected TV comes from a desire to reach younger consumers who are more likely to use online video services.

However, some issues remain for connected TV. With the fragmentation of platforms and services, each has their own dataset on viewers that cannot always be compared exactly against another. There is also no industry agreement on a common measurement currency for connected TV to equalize the buying process so all know what they are buying. The large number of platforms offering connected TV inventory, none of which have the viewing hours equal to TV at this time, makes buying connected TV complex in determining with whom to work.

When it comes to the technology used for connected TV ad trading and insertion, the pieces are in place but the system is complex. When a provider directly sells an ad, there is a single call made to an ad server. However, with a programmatic marketplace there may be many hops out to programmatic platforms with which to contend. That adds to the latency of the stream and may result in no ad filling the spot or the viewer turning away from the program.

The benefits outweigh the concerns, so we expect the rising awareness of the opportunity in connected TV advertising to drive more usage of the technology to the benefit of advertising technology vendors.

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Technology, Media & Telecom
Are Local Sports Keeping Subscribers In Traditional Multichannel Bundles?

Highlights

20% of wireline broadband homes did not have a traditional multichannel subscription at the end of 2017

Consumers could be championing a delivery revolution

Dec. 17 2018 — Even as online competition serves up content at reduced costs, traditional multichannel is still in a prime position to feed sports-hungry consumers. Cable, satellite and telco video services offer a guaranteed look at local NFL teams on Sunday and often carry the full array of regional sports networks that may be harder to get through streaming alternatives.

However, programmers pass the cost of pricey sports contracts on to multichannel operators, and the resulting price hikes are a large consideration in the fraying relationship between linear video services and their subscribers.

Programmers and multichannel operators alike can see the benefits of the sports-first strategy in Nielsen ratings, and MediaCensus data suggests subscribers are stickier in markets with local teams.

Markets with at least two teams in either the NFL, NBA or MLB have shaved nearly 2 percentage points off the 9.9% national decline in multichannel subscribers since the end of 2014.

Markets with NFL teams managed to hold on to the biggest share of multichannel subscribers over the analyzed period, but MLB and NBA markets were not far behind.

The step down in subscriber retention could be expected considering the popularity of the NFL on the national sports stage, but the extra hurdles that sports fans of other leagues have to clear should also be considered.

Basketball and baseball fans are often forced to move up into higher-priced programming tiers with sports fees attached to watch their local teams on a regular basis. To reinforce the primacy of regional sports networks, programmers will often black out national NBA and MLB telecasts featuring local teams. Even direct-to-consumer services from the leagues will defer to local coverage.

Nationwide, a winning team since 2015 did not strongly correlate to a significantly sturdier multichannel market, but that dynamic differed slightly on a regional level. In general, East Coast and Northeast markets with winning teams, particularly in the NFL, lost a smaller percentage of their subscribers than markets where teams lost more than they won.

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Technology, Media & Telecom
Studios, Exhibitors Set To Spar Over Streaming

Dec. 14 2018 — According to an article published in Variety in November, Warner Bros. and Universal Pictures are expected to reopen conversations with exhibitors about earlier VOD releases for their films. The studios argue that an earlier on-demand release helps minimize piracy and allows them to better leverage the multimillion-dollar ad campaigns launched for their films' theatrical debuts.

Exhibitors, on the other hand, worry that a shorter theatrical window will reduce ticket sales as potential patrons opt to wait and watch films at home. Fewer ticket sales also lead to lower concession revenues -- the most profitable aspect of the exhibition business.

The article also notes that studios have an extra incentive to negotiate earlier release windows, as WarnerMedia is launching its own streaming service in 2019 while Comcast, home of Universal, is looking to expand its streaming offerings. Having their major films released on their respective services shortly after theatrical release could help drive subscriber growth.

Pushing for a film's possible VOD release just weeks after its big-screen debut could be seen as an aggressive move, but studios have been slowly shrinking their theatrical release windows over the past 20 years. In 1999, the average theatrical window was 169 days; this was just as the DVD market was beginning to explode and the VHS cassette was still a market factor. Soon, DVD became a massive source of revenue for studios and they began to release their films on home video at a quicker pace. In 2017, the average theatrical window dropped to 105 days before dipping to 99 days in 2018.

The major studios all trimmed their theatrical windows by a fair amount between 2000 and 2018, from an average of 172 days down to 94 days, a difference of more than two and a half months. Twentieth Century Fox and Universal Studios had the shortest average theatrical window at 89 days, while Walt Disney had the longest theatrical window at 107 days.

We tracked eight blockbuster films in 2018 that were released on home video less than 90 days after premiering in theaters. The shortest window belonged to "Venom" ($212.3 million domestic gross), which was released in theaters on Oct. 5 and will debut on DVD and Blu-ray just 74 days later on Dec. 18.

The motion-picture business has always been able to capitalize on new technology, from the TV to the VCR to the DVD player, to drive growth. Streaming video has become the primary source for home entertainment — just ask Netflix and its 137.1 million subscribers worldwide. If studios are launching their own services, they naturally want their own premiere content on those services. Studios may not get the rapid release window they are hoping for, but they will likely keep bringing it down slowly, as they have for the past two decades.

If you are a client then learn more about Economics of TV & Film below:

Movies make their way to your home in less than 100 days in 2018

State of Home Entertainment 2018

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