Month: September 2020

Ironically, TV networks have put their streaming ad businesses on a path to parity with their linear businesses by removing parity between their streaming and linear ad prices. Lowering streaming ad rates, by 10% to 20% in some cases, may seem counterintuitive, but creating a slope between linear and streaming prices enabled TV networks to slide advertiser demand to the medium where the audience is actually growing and where, in time, ad prices can increase as more money moves into the market.

Historically, many networks have sold their streaming inventory at roughly the same price point as their linear inventory. They believed that, whether someone was watching a show through their cable box or a connected TV device, the impression for ads running during that show should be worth the same. As much sense as that seems to make, ad buyers have pushed back against such a one-price-fits-all approach, if only because calling for lower streaming prices allows them to save money. 

At the same time, TV ad buyers are growing agitated by linear TV’s supply and demand dynamic. While linear viewership is eroding, traditional TV remains an easy, cost-effective way for advertisers to reach a large, concurrent audience. That is why advertiser demand for linear TV has held fairly steady despite the acceleration in cord cutting. However, the combination of steady demand and eroding reach continues to push up linear ad prices, and that dynamic is not sustainable and likely to give way, leading networks to lose revenue if they cannot accommodate the demand. 

Even this year, agency executives estimated that advertisers committed less money to TV networks’ linear inventory than they did a year ago. Advertisers spent $20.28 billion in last year’s upfront, according to an estimate from eMarketer. “The dollars were there, and linear couldn’t fit all the dollars,” said a second TV network ad sales executive.

In other words, TV networks need their streaming properties to offer a release valve. But for that to happen, they need to get advertisers to buy their streaming inventory.

To incentivize advertisers to buy the networks’ streaming inventory, TV networks have had to chip away at their streaming ad prices. This process began last year when some networks shaved off their streaming ad rates by single-digit percentages. While that had some positive impact to get ad buyers to move money to streaming, “no question streaming had not hit critical mass last year. Covid changed the game,” said the first TV network executive.

The shelter-at-home orders rocketed networks’ streaming viewership and, thereby, their streaming pitches. Some networks saw triple-digit increases in streaming viewership during the second quarter. Those viewership increases are especially valuable because large chunks of networks’ streaming audiences do not tune into their linear channels, so the streaming viewership can increase a network’s audience by 30% to 40%. Streaming “is adding to supply, which is allowing us all to bring in more dollars,” said the second TV network executive.

And this increase in streaming viewership translates into an increase in inventory supply, enabling networks to drop their streaming ad prices because they could make up the difference with the increased number of impressions they can sell.

“Digital pricing was certainly more south than linear pricing. I think that’s reflective of the supply of premium digital video becoming more significant,” said a third TV network ad sales executive.

In a way, the TV networks made a bet in this year’s upfront. By dropping their streaming ad prices to encourage advertisers to buy that inventory, they can hope for the streaming ad demand to continue to grow to the point of pressuring those prices to rise. 

Even in the short term, the bet is paying off by protecting networks’ advertising businesses in a precarious financial climate. Advertisers may have committed less money to network’s linear inventory in this year’s upfront, but because of the money committed to networks’ streaming inventory, the amount of money committed overall held flat and even increased by single-digit percentages, according to agency executives.

“At the end of the day, we can’t take a CPM to the bank. Wall Street doesn’t care about the CPM. They care about dollar volume,” said the first TV network executive.

Confessional

“I think it’s a crock. I don’t know what they’re trying to accomplish.”

— TV network ad sales executive on P&G’s call for the TV upfront market to change

Stay tuned: Rising sports rights fees

The stakes are rising for the rights to televise major sports. Fox is preparing to spend as much as $2 billion per year to air NFL games on Sundays. And Disney is polishing up its pitch to retain rights to Monday Night Football. Meanwhile, WarnerMedia has renewed its MLB deal and will reportedly pay $3.7 billion over seven years, a 65% increase in the per-year price.

WarnerMedia’s MLB deal crystallizes how valuable sports are to TV Networks and how much more expensive their rights are likely to get.

NFL owners taking note. Ratings dwarf those of Baseball.. https://t.co/rUe1c17V5z

— Andrew Brandt (@AndrewBrandt) September 24, 2020

While TV sports viewership has dipped over the past two months amid a glut of games, live sports remains the main means for TV networks to attract large audiences and the ad dollars that follow. “These programs are still doing the best ratings of everything that’s on linear TV,” said one agency executive.

And the sports leagues know this. So like an MVP-caliber franchise player poised to become a free agent, the leagues — especially the NFL and NBA — are looking to their major paydays as their existing rights deals are set to expire over the next couple years.

The ballooning rights fees could make the leagues more likely to sell their rights to tech giants like Amazon and Google that may be better able to stomach the exorbitant amounts. However, leagues like the NFL have said how important it is for them to reach large live audiences and have called for digital players to prove they can equal traditional TV on this front.

So, while the tech giants attempt to prove they can measure up TV’s concurrent viewership, the TV networks are trying to show they can match the tech giants’ financial offers. Now to see who has the biggest audience and the deepest pockets.

Numbers don’t lie

22.2 million: Average combined number of viewers for English-language broadcasters prime-time programs over the past year.

1 million: Number of people who subscribe to AMC’s standalone streaming service, Shudder.

30: Updated maximum length, in seconds, for videos posted to Instagram’s TikTok clone Reels.

Trend watch: Branded videos return to production

Movies and TV/streaming shows aren’t the only projects that have begun returning to physical production. So are branded videos. But, as with movies and shows, branded video productions are not the same as they were before the coronavirus crisis shifted shoots to Zoom in March.

In addition to adopting health and safety measures — like requiring crew members wear masks, regularly testing everyone on set and limiting shoot sizes — branded video productions are also dealing with brand executives being a bigger part of shoots, according to producers at agencies and media companies that create videos for brands.

Because of the smaller crew sizes on set, physical productions continue to use video conferencing for producers and even directors to remotely monitor and guide some shoots. However, if a producer can follow along on Zoom, there’s no reason a brand executive can’t also look in. And so they are.

Under normal circumstances, brand executives are often on set, so their presence on Zoom is not surprising. However, on a regular production, brand executives can be be cordoned off to a specific area, allowing producers to speak to the crew without needing to involve a brand executive who may not be familiar with the ins and outs of a shoot. But if those conversations are occurring over Zoom, then everything is within ear shot of the brand executive.

That doesn’t have to be a bad thing, but it means that producers have to be extra cognizant to manage communication so that wires don’t get crossed — and the brand executives allow the producers and crew members to do their jobs.

What we’ve covered

Food52 jumps further on streaming bandwagon with new CTV app:

• Food52 will debut a connected TV app on Roku, Apple TV, Amazon Fire TV and Android TV.
• The food publisher first entered the streaming market in November 2018 with a 24/7 streaming channel.

Read more about Food52 here.

How A+E Networks is building a portfolio of free 24/7 streaming channels:

• A+E Networks has launched its third free, ad-supported streaming TV channel in the past year.
• The channels provide an opportunity for the TV network group to expand its audience and advertising beyond pay-TV subscribers.

Read more about A+E Networks here.

Snapchat is pitching high-frequency, high-reach ad campaigns:

• Snapchat’s “Platform Burst” promises advertisers to reach a certain amount of people frequently over three or five days.
• Specifically, the app guarantees advertisers will reach at least 40% of their target audience 15 times.

Read more about Snapchat here.

TV advertisers grapple with glut of live sports affecting viewership:

• Live sports TV viewership has fallen short of advertisers’ expectations.
• The shortfalls mean TV networks will need to make up for the missed reach guarantees.

Read more about live sports viewership here.

How college football’s return could shore up TV advertisers’ sports viewership shortfall:

• College football’s return could plug advertisers’ lower-than-expected sports viewership gap.
• However, there are questions as to what extent advertisers can expect to receive make-goods for college football.

Read more about college football here.

What we’re reading

NBCUniversal’s cable channel culling:
NBCUniversal, like WarnerMedia, is reorienting its business from being predominantly centered on traditional TV. That may mean cutting parts of its that business. The company is already phasing out the position of cable network president and may eventually do away with entire cable channels, according to The Wall Street Journal. Dramatic as the latter move would be, it would be a shrewd one considering how declining linear viewership and accelerating cord cutting is making the economics of operating a cable TV network less tenable.

TikTok’s creator charm defensive:
TikTok’s future remains up in the air, which has put on edge the creators that have come to rely on the mobile video platform. While some creators have started to spread out to other platforms like Instagram and YouTube, TikTok has stepped up its efforts to keep creators posting to its platform, according to The Hollywood Reporter. In addition to company blog posts and TikTok executives’ tweets, the platform’s creator managers have been regularly checking in with creators to address any concerns. The communication appears to be working to assuage creators’ concerns, though the episode is only the latest example of why creators should diversify rather than becoming overly reliant on any one platform.

Connected TV’s ad fraud issue:
Where audiences go, so do advertisers. But where ad dollars go, fraudsters are soon to follow. With connected TV accounting for a larger share of audiences’ attentions and advertisers’ investments, the amount of fraud in the CTV ad market is also on the rise, according to The Wall Street Journal. As with other digital media, the fraud is typically found in the programmatic side of the market, with bad actors faking impressions. However, while the methods of fraud are not necessarily new, identifying and eliminating fraud in the CTV ad market is difficult because of how underdeveloped and opaque the market remains.

While research and publishers’ own numbers show healthy subscription spikes over the last six months, the highs have leveled. Many are still seeing more growth than before March. Here are how some of those concerns are being allayed.

The gulf between volume and revenue

Some publishers pushed bargain-priced trials to capitalize on readers’ hunger and willingness to pay for news, putting a dampener on the lifetime customer value. Others let cash-strapped readers pause their accounts. While good for relationships, that’s bad for immediate revenue. 

Nevertheless, U.K. digital publishers’ subscription revenues increased by 19.3% in the first three months of 2020, according to a study by the Association of Online Publishers and Deloitte. For example, The Telegraph — an AOP member — had a blended average revenue per subscription of £197.06 ($253.42) in August across 511,837 print and digital subscribers.

The Telegraph has hovered between £197 ($253.34) and £200 ($257.20) ARPU over the last few months, but it’s trending in the right direction: In December 2019, ARPU was £194 ($249.48) across 423,311 print and digital subscribers. Broadly, it’s growing subs without reducing revenue. 

Subscriber growth was fueled by editorial newsletters, it said.

Demand for paid content stays high

Another well-worn fear is that those who subscribe primarily eager to stay up-to-date with a quickly-moving news cycle will lose interest when that crisis abates (despite, sadly, there being little abating).   

Piano, which works with publishers on their subscription models, found that across its database of 300 publishers, the median exposure rate of paid offers increased from 6% in April to 14% exposure rate in August.

“That was driven by higher audience engagement,” said svp strategy at Piano, Michael Silberman. “People visited more and viewed more pages, so hit paywalls more often.” This was fuelled by “publisher tactics [like] more aggressive promotion of subscriptions … responding to user demand and urgency to replace declining ad revenue.”

Usually, that leads to lower conversion rates as publishers inevitably hit more users who are less likely to subscribe. In this instance, conversions held steady and demand for paid content remained high. 

One and done

Low-value customers coming in on a deal, it’s feared, will spin out after the free trial. 

Zuora, which makes a business out of selling subscription technology to different sectors, released its Subscription Economy Index across 1,000 clients last week and found that the pandemic has not increased churn rates for publishers. Annual churn was 26.2% for subscription publishers for the second quarter, in line with the average company churn of 25.7% across sectors. Those publishers that fare the best are ones with longer-term contracts, annual rather than monthly. 

“People are concerned that it’s a one-time lift,” said Rob Ristagno CEO at The Sterling Woods Group. “You hear a lot about subscription fatigue and cancel culture, but publishers are doing a good job retaining who they have.” 

The longer publishers work on subscription models, the more they understand what subscribers want and how to deliver that. Over time, they get more nuanced. 

Publishers like The Atlantic — which gained 300,000 new subscribers in the past 12 months — segment people who sign up more suddenly into covid-cohorts and track them more closely to establish a reading habit. Positive signs include signing up for newsletters and following the magazine and its authors on social media. Three visits to the site a month help avoid lapsing. Also, over the past year, The Economist has seen a 21% increase in the number of subscribers who are “highly engaged” with its content, a custom metric based on the correlation between engagement and retention. 

Another tactic gaining pace to manage retention are bundles, like Bloomberg Media and The Athletic or dual subscription offer for The Washington Post and Financial Times, two established players who can cross-sell to grow.

Future cannibalization

Last month, one magazine exec, buoyed by a north of 60% growth in subscribers, was cheered by the millions in revenue that digital subscriptions brought in over the last two quarters.

The exec also anticipated how this would cannibalize newsstand sales in 2021. 

For publishers, this requires a shift in perception that began before coronavirus. According to Amy Konary, global vp of Zuora’s Subscribed Strategy Group, “companies with business models built around ownership are afraid to open the spigot,” fearing that “usership models will destroy the business.”

A Harris Poll study conducted before the coronavirus, points to that behavior already was changing: Globally, 74% believe that in the future, people will subscribe to more services and own less physical stuff. Also, 70% agree that subscribing to products and services frees people from the burden of ownership, including maintenance, clutter and declining value.

Often, these new subscribers are new people and represent new market opportunities. And relationships with digital subscribers have more longevity than people buying from the newsstand, “for legacy publications, the five-to-one preference of younger readers for digital to print underscores the case for building that business,” writes Poynter’s Rick Edmunds.

“In the media and publishing space, what is largely driving people to think about subscription models more so is the absolute collapse of ad revenue,” said Konary. “Times of economic crisis are times where subscription businesses accelerate. It’s a very attractive model, especially in times of adversity and scarcity.”

While that doesn’t mean spending on new formats has dropped to zero, it does mean that publishers hoping to increase the size of their ad deals at year’s end have to make it even easier for brands to try things out. The advertisers’ reticence is one more challenge that coronavirus has created for publishers’ businesses, but it has also pushed them closer to goals many of them had set for themselves over the long term, such as selling ad formats that leverage their first party data, or having more control over the ads’ creative process.

“There’s not much experimenting happening now,” said the revenue leader at one large digital publisher, who asked not to be identified. That source noted that, over the past few months, fewer clients have expressed interest in trying new ad networks, or trying to target a new “‘just to see how it goes.’

What these clients need are flexibility, efficiency and scale,” that executive added. “The partners that can deliver on that are well-positioned.”

For most of this year, the economic and cultural havoc wrought by coronavirus has forced marketers to prove their ad spending works. That has squeezed publishers’ branded content businesses, forced ad sellers to think about campaigns that can be executed in days, rather than months, and made it much harder for publishers to win new business. 

Many advertisers have spent the past several months operating on compressed schedules because they cannot do long-term planning, said Erik Requidan, the cofounder of the site monetization services consultancy Media Tradecraft. And those that had to get rid of a lot of creative assets that were inappropriate during the pandemic do not have the time or resources to build things that might have to fit into a non-standard unit.

“It has to be simple,” Requidan said. “It can not be complex.”

The pressure has also compelled some brands to reallocate their budgets, taking money that might have been spent on experiments in a normal year and putting it into something that drives sales. Those experimental ad formats, quite often, are designed to solve for branding objectives, rather than direct response objectives, said Anthony Rinaldi, vp of media activation at the media agency Essence. “If budgets are going to get cut, it’s from branding efforts,” Rinaldi said.

Publishers with new units that can deliver performance have been somewhat less affected by marketers’ changing appetites. “There’s a shift to more performance-driven versus experimental brand-driven,” said Jeffrey Turner, director and head of commercial product at the Washington Post. “We’re relying less on distinctly styled ad formats.

“Most of the dollars are going to things that we have data and support to know that it’s going to perform versus throwing paint on a wall,” Turner said, adding that 60% of the insertion orders Turner’s team has gotten have leveraged the Post’s first party data.

Other sell-side people are hoping that some combination of ease and familiarity can help coax buyers into trying something new.

For example, the mobile ad vendor Kargo recently launched AMP versions of some of its most performant, effective ad units. And Tuesday, Vox Media announced it was launching a self-serve ad manager for its ad networks Concert and Concert Local.

“The buyers are in the business of making money too,” Requidan said. “They have to find ways that make sense for them.”