TV Everywhere: who's paying?
Operators are racing each other to launch TV Everywhere (TVE) services. But scaling TVE requires a massive investment, and it’s not always clear how operators intend to profit.
Business model confusion
The subscription and revenue models for TV Everywhere are far from clear. Pay TV operators see TVE as an opportunity to fight rising competitors and reduce the threat of “cord-cutting” in subscriber’s homes. So, many are absorbing the initial cost of deploying TV Everywhere services for now.
At the same time, content owners are demanding new licensing fees for the privilege to be able to stream content to any device, anywhere. Inexpensive over-the-top alternatives are vying for the consumers’ wallet, and have essentially put a ceiling on subscription prices. Incremental subscription revenues for TV Everywhere alone are not likely to fully cover the cost of ABR streaming and content delivery networks for operators.
Personalized advertising: crystal clear benefits
But there is hope for TVE in personalized advertising.
The most significant and most profitable portion of revenue for any Pay TV operator comes from advertising. But online video is on the rise. In October 2011 alone, Americans viewed 7.5 billion video ads, according to comScore. Forrester Research predicts that online ad spending will eclipse television ad spending within the next five years. By 2016, advertisers will spend 35% of their ad budgets on online advertising--almost $77 billion.
Operators can attract some of that spending with TV Everywhere. With TVE, operators gain the ability to stream content to an individual screen such as a tablet or a smartphone. This presents operators with a tremendous opportunity: addressable and advanced network-based advertising.
Dynamic, individualized and in-stream network controlled ad insertion into ABR sessions appears to be the next frontier in TV Everywhere. Individualized streaming creates the possibility for personalized and highly addressable advertising. This is an area of advertising that is yet to be fully explored--especially in new digital media such as online and TV Everywhere.
Relevancy is the key
In order to fully capture ad revenues, operators are grappling with the technical details of ad insertion for ABR streaming.
Network controlled ad insertion is only an opportunity for operators if they can deliver relevant, timely information to their customers. To accomplish this, operators need accurate analytical models based on anonymous subscriber data.
If operators invest in more advanced, anonymous forms of subscriber information collection, they’ll be able to deliver more targeted, relevant advertisings in their TVE services. Those that come out on top will reap the benefits: delivering higher CPMs* while maintaining subscriber satisfaction.
*CPM, or cost-per-mille, is a metric used to price advertisements based on every 1,000 impressions of the ad.
