CES 2020: State of Video (OTT + Pay TV)

While 8K TVs and new display technologies (e.g., MicroLED, rollable screens, more OLED) commanded the show floor (and the spotlight), a significant portion of the video market’s presence was held behind closed doors in hotel suites and ballrooms. These display technology updates are certainly important, but it will still be years before 8K becomes a mainstream concern for both pay TV and streaming media. With the continued expansion of the streaming media landscape, it should come as little surprise that a number of video companies put the emphasis on bringing Over-the-Top (OTT) and pay TV services together. The emphasis was on operators that haven’t taken the plunge and embraced OTT as part of their platform/service, which speaks to the growing maturity of this increasingly symbiotic relationship.

Content security and anti-piracy was another key topic (to be covered in another ABI Insight) along with ATSC 3.0, which was labelled “NEXTGEN TV,” but more meetings and conversations circled back to the impact of OTT.    

At face value, the pay TV and OTT relationship is mutually beneficial; by adding OTT services to their pay TV portfolios, operators are providing services their customers want and creating new opportunities to serve as a central hub for media and entertainment, while OTT services gain access to more customers. There is, however, more at work than simply bringing two types of viewing habits under one roof or platform. The trend toward Direct-to-Consumer (DTC) has produced a number of changes to business models and content windowing that is starting to bring OTT viewing habits closer to traditional pay TV. Most notable is the addition of scheduled programming to OTT services—Disney Plus’ The Mandalorian and CBS All Access’ Star Trek: Picard and Star Trek Discovery are key examples in which episodes were released on a schedule rather than all at once. Binge watching is reportedly becoming less critical to the OTT streaming experience and, when coupled with the high costs associated with original programming, the industry should expect to see more serialized content.

As OTT streaming begins to look more like traditional pay TV, advertisers will increasingly view these streaming shows at parity with more traditional broadcast-type content. Before this happens, however, the industry needs to standardize metrics and analytics. Broadcast television and key players like Nielsen often use the Average Minute Audience (AMA) to measure viewership, which provides the average audience size for any given minute of a program’s runtime; contrast this to the streaming services and not only are viewership figures held to a much higher standard in broadcast and pay TV, but the OTT side includes a wider breadth of variability.

On the advertising front, while there is variability in what constitutes an ad impression, these conditions are made relatively transparent to the advertisers. For instance, most services at minimum adhere to the MRC’s requirements for viewable display advertising impressions:

• Pixel Requirement: Greater than or equal to 50% of the pixels in the advertisement were on an in-focus browser tab on the viewable space of the browser page
• Time Requirement: The time the pixel requirement is met was greater than or equal to one continuous second, post ad render.

Note that the MRC also defined a mobile viewable video ad impression as 2 continuous seconds, with the same 50% of the ad’s pixels in view. Quite a few of the social and networking services offer (or plan to offer) some aspects/options of their video advertising services that follow MRC’s standard (e.g., Facebook, LinkedIn, Pinterest, Reddit, Snapchat, Twitter). Advertising, though, is far more complex than simple views, and there are different rates for Cost Per Click (CPC) and different viewing criteria for Cost Per Thousand Impressions (CPMs) or individual impressions. For example, YouTube and Facebook offer more rigorous viewing standards as an option via their TrueView (30 seconds or end of video, whichever is shorter) and ThruPlay (97% of video for 15 seconds or less video or 15 unique seconds for longer videos), respectively.

While the advertisers may know what they are paying for, the metrics used to compare viewership rates do not present an even playing field. For example, in Twitter’s first live streams with the NFL (in 2016), Thursday Night football games averaged a total audience of 2.7 million viewers, based on a metric that required a viewer watch at least 3 seconds of the game. The average minute audience, however, was much lower, averaging 265,800 viewers. Facebook, Netflix, and others similarly report viewership statistics that may seem high, but, when compared to more rigorous reporting standards like average minute audience, can start to look inflated. Netflix recently altered its viewership metric (“watched”) from requiring viewers watch at least 70% of an episode (if a series) or its total runtime (if a movie) to playing for at least 2 minutes. While Netflix claims the older metric disadvantages longer films, the 2 minute threshold very likely inflates viewership numbers. While Netflix doesn’t include advertising today, similar services could make it challenging to assess advertising opportunities if the metrics do not match. In other words, if an advertiser is deciding which services to target, services like Netflix might appear to have much larger “engaged” audiences than a pay TV channel that is reporting viewership using a different metric. While the views of the ads might be the same, since digital can track if an ad was displayed or not, the level of engagement for an audience that is watching the content versus one that may have only tuned in for 2 minutes or less is not necessarily equitable.

The video industry is bringing broadcast, pay TV, and OTT together, and while more needs to be done to make the viewing experience seamless from the end user’s perspective, the necessary steps are being taken (e.g., OTT service onboarding, subscription/subscriber management, cross-platform content management search and recommendation, etc.). The next phase needs to address cross-platform analytics and metrics—at the most basic level, video viewership needs to be tracked equitably across all services in order to better gauge habits and consumption. Currently, much of the usage data from OTT applications is not available to the operator or aggregation platform, which means metrics like viewership are still at the discretion of the OTT providers. As more OTT services add or embrace advertising as a revenue stream, these barriers should start to come down, as advertisers will increasingly demand a more even playing field between traditional linear programming and OTT.

As companies navigate the ever-evolving privacy waters, it could become possible to add more layers of tracking and expand addressable advertising—e.g., combining Internet Service Provider (ISP) data with ads shown in streaming and broadcast services. These higher order steps will certainly take time and may never come to fruition if the privacy concerns prove too significant; regardless, companies need to start moving and thinking along these lines because, as both sides (traditional and OTT) are converging, it is becoming no longer a matter of if, but a question of how fast and when.