Blog Posts

Hype-Buster: Why Advertisers Should be Wary of Predictions of PayTV’s Decline

Hype-Buster: Why Advertisers Should be Wary of Predictions of PayTV's Decline

Recent and rampant speculation about the demise of Pay-TV has been downright morbid – akin to the public autopsy of a patient who still has a pulse.

Just the other day, Digital TV Research projected that by 2020 Pay-TV revenue in the US would be roughly 88% of the nearly $103 billion recorded in 2013. Conversely, the firm projected a 20% increase in Over-the-Top (OTT) revenues in the same timeframe.

But as gory as the current dissection of the Pay-TV market can sometimes get, buyers and sellers of media inventory cannot afford to look the other way. The ultimate fate of the Pay-TV market holds lasting and lucrative implications for the television advertising industry.

RIP Pay-TV?

The Pay-TV deathwatch unofficially kicked off in November of last year, coinciding with public statements from Netflix CEO Reed Hastings predicting that the last holdouts would cut their cords by 2030. Since then, a string of pronouncement from content providers, network broadcasters, telcos and even Pay-TV satellite services detailing plans to offer programming direct to consumers over the Internet has prompted the media to all but deliver the last rites to Pay-TV.

The reality is that while the traditional Pay-TV business model is no longer the only recipe for television consumption in our broadband, BYOD world, it’s far too early to pull the plug or to speculate with any certainty on what television watching will look like in 10-20 years – other than it will be multiplatform and more personalized than it is today.

The many variables, possible permutations of service packages and overlap between stakeholders make it impossible for even the most accurate crystal ball to bring tomorrow’s TV Land into focus.

The Great Unknowns

As we approach NAB 2015, the shape the video distribution ecosystem will take in the next year or so is very much a mystery wrapped in an enigma that, for good measure, is wrapped in a conundrum. Below are just a few of the variables currently in play.

  • Too Many Participants: Some consumers may find the onrush of a la carte options from content providers too filling. Choice has its limits, especially when it places a burden on viewers to jump through hoops or deal with tens of entities to assemble a customized package that matches their sensibilities and wallet.
  • The Right Price: The major beef with Pay-TV is that it forces consumers to pay for content they don’t watch. But when all of those a la carte items mentioned above are tallied up, Pay-TV – even with its hundreds of superfluous channels – might not be such a bad deal.
  • Not Dead Yet: Pay-TV players aren’t standing pat. Painfully aware that they need to evolve their services in lockstep with consumer demand, MSOs and other programmers are trotting out new business models in bunches, including smaller packages, multiscreen services and even cozying up to companies whose execs are predicting their demise. And as Digital TV Research points out, Pay-TV will still be bringing in multiples of OTT revenue by 2020 — $90.71 billion to $10 billion.
  • Coverage Overlap: Often left out of Pay-TV eulogies is the fact that MSOs and other communication service providers (CSPs) own the pipes and the spectrum that all that OTT content rides on. Given that the recent regulatory winds have blown toward Net Neutrality, crimping a possible revenue pipeline for service providers, MSOs and telcos will be in no hurry to widen their broadband lanes to carry all of that extra OTT traffic coming from former video service customers.
  • Emerging Technologies: The gradual but definitive migration of the media industry toward IP-enabled technologies, including the cloud, holds the potential to upend the media industry balance of power. Technology introductions that leverage the cloud, including cloud DVR and dynamic ad insertion (DAI), are providing content aggregators and distributors with the opportunity to deliver unique and compelling experiences that match the sensibility of today’s video consumer and open up new monetization opportunities.

So, what’s an advertiser or inventory holder to do?

Despite all of the uncertainty around business models and ecosystem dynamics, marketers and media companies can count on consumers’ appetites for an omniplatform experience to carry the day. As much as the media wants to bury Pay-TV, traditional linear programming has a place in this omniplatform environment, alongside VoD and other time-shifted content.

Omniplatform World

Rather than waiting for all of the pieces to fall into place, advertisers and inventory holders should cover all bets by teaming up with technology suppliers possessing a holistic, 360-degree view of the emerging video consumption landscape. Media companies should waste no time in finding a cloud-savvy ad tech partner that’s able to maximize advertising avails across linear, OTT and time-shifted content.

By extending the right degree of visibility into all types of content inventory, while leveraging the latest industry standards and breakthroughs in big data and ad insertion technology, media companies can boost the value of their inventories by reaching relevant viewers with fresh and compelling commercials — wherever and whenever they view content.

That’s a prescription for success — regardless of whether Pay-TV flat lines or makes a miraculous recovery.

 

Questions or comments? Send your feedback ››