Analysis: TV Connect Day 2

Experts from Ovum offer their take on hot topics at TV Connect
TV Connect took place in London earlier this week.
TV Connect took place in London earlier this week.

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Sky’s AdSmart offers an important glimpse of the future

By Adam Thomas, Lead Analyst, Global TV Markets, Ovum

In a keynote address at TV Connect today, Jamie West, Deputy MD at Sky Media, provided evidence of good progress with AdSmart, the company’s targeted advertising service. It now has 465 advertisers actively using the service, of which 78% are new to TV or new to Sky. The metrics also suggest that when an advertiser uses the service they are impressed, with a 64% return rate.

This positive progress report is important because AdSmart represents one of a handful of real-world examples that provide a clear view on how a next-generation TV advertising service will work. Traditional TV players like Sky are increasingly meeting consumer demand by making content available online. Ovum’s view is that this should be exploited by creating a compelling cross-platform advertising proposition that combines the reach of traditional linear TV with the targeting, addressability, and accountability capabilities of online video advertising.

At present, ratings agencies are not adequately capturing activities such as catch-up viewing, dynamic ad insertion, and the cross-platform behavior of audiences that increasingly flit between devices, services, and distribution technologies. Sky has overcome this by creating its own 600,000-strong viewing panel but, in the main, the failings of established industry measurement methods are penalizing those broadcasters that are responding to consumer demand for more flexible viewing arrangements.

The extrapolation of TV audiences from a limited number of panel households is sorely outdated. Better and more granular data is available and advertisers are unable to make full use of emerging platforms until they are provided with reliable data upon which to base their purchasing decisions.

Ovum believes that TV and online advertising technologies are increasingly merging: This is one of the defining trends of the current era of TV advertising. Broadcasters and pay-TV operators must increasingly co-opt relevant technology and strategies from online advertising in order to offer broad, integrated campaigns across linear, on-demand, DVR, and catch-up – via all the device types used to watch visual entertainment.

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WWE Network is starting to pay off, providing key D2C lessons

By Ted Hall, Senior Analyst, TV

D2C trailblazer WWE today provided an insightful update on the rollout of its WWE Network product, an OTT-video service that offers the bulk of the sports entertainment organization’s content to fans on a stand-alone basis in 177 countries for a monthly fee ranging from $9.99 in the US to £9.99 ($15.40) in the UK.

Most importantly for the market leader in professional wrestling is that the radical shift in its business model is starting to pay off. Although it took a little longer than expected, WWE Network has now reached 1.3 million subscribers, having launched in February 2014. This puts it in the breakeven range that will compensate WWE for revenue lost from traditional-TV-distributed monthly PPVs, access to which cumulatively costs around $675 when purchased via US pay-TV platforms.

Evaluating the Network’s success, Ed Wells, SVP & MD of International for WWE, declared that the company was reaching the “light at the end of the long dark hallway.” He shared some key lessons that will provide food for thought for other content providers moving towards a more millennials-focused digital distribution strategy.

Notably, Wells explained that WWE Network-driven digital engagement has helped drive a 2–3% global ratings increase for its flagship, advertising-supported Raw and Smackdown shows, both of which continue to air on a first-run basis only via broadcast TV.

The finding supported his claim that OTT viewing on other platforms and devices is additive and is serving to boost the overall audience for WWE’s programming. It will also provide encouragement for other broadcasters and content owners seeking to maintain their linear TV ratings at the same time as building a digital following.

Simplicity was another key message from Wells. Some initial tinkering with the pricing – including a minimum six-month commitment and an additional monthly premium for allowing users to cancel at any time – ultimately gave way to a no-nonsense £9.99, no-commitment model. Educating fans young and old – with many more mature fans that had lost touch with the product drawn back into the fold by the nostalgia of WWE’s archive content – was crucial, Wells said.

Although these are lessons that all content owners can learn from, whether or not they can achieve the same level of appeal with their own D2C services remains to be seen. WWE Network’s value proposition means that it appeals to cord-cutters and pay-TV subscribers alike – a saving of around $555 on PPVs when received via the OTT service instead of traditional TV is difficult for even a casual fan to resist. D2C offerings from the likes of HBO, CBS, and Nickelodeon cannot have quite the same allure, catering more to a generation of TV viewers whose faith in traditional pay TV may be waning, rather than the large number of households that remain loyal to it.

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Niche interests, big revenue

By Tony Gunnarsson, Senior Analyst, Ovum

Outside the mainstream, VOD is also turning out to be an ideal platform for dedicated fan groups and “passionate audiences” who are prepared to pay for access to their specific niche interests. This is the view of Vimeo, which identified its target audience as such.

Sam Toles from Vimeo talked about how independent content producers are selling content on the Vimeo On-Demand platform for the relatively high price of $15, rather than the typical $5 per rental of mainstream Hollywood content in SD on iTunes and other online video stores. Some videos on the platform have generated “six-figure revenues.”

Interestingly, Vimeo’s revenue-sharing deals with producers are on the basis of a 90/10 split which, when compared with mainstream standards, is a very generous proposition! Having already made a move into original programming, with the TV series High Maintenance and other Vimeo originals, including the forthcoming Con Man series (due September 2015), Vimeo is also considering the SVOD opportunity. Sam Toles mentioned that a Vimeo SVOD platform will be launching in June or July 2015.

Vimeo claims that “hundreds of thousands of consumers” pay to access content on the video streaming site. The general strategy is the age-old one – the majority of content is free but if you want to access premium content you have to pay extra. Perhaps here is an example that could apply to developing markets where free video streaming platforms dominate OTT Video, such as in Asia and elsewhere.

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OTT continues to be the buzzword as SVOD becomes mainstream

By Tony Gunnarsson, Senior Analyst, Ovum

There is an increasing recognition amongst TV Connect delegates and speakers that SVOD is now mainstream, a stance that is in line with Ovum’s recent research on OTT video. A lively discussion moderated by the self-styled ITV doctor Rick Howe suggested a consensus that there will be a surge of SVOD services launched in the coming year; however, not all will succeed.

Elsewhere, transactional VOD – once considered the future of home video – was largely quietly ignored. Some TV Connect delegates expressed a view that we are now at the mythical take-off point where consumption of a la carte premium VOD is fulfilling its earlier premise. But, in reality, Ovum’s view is that transactional VOD at a mass-market level is now largely a complement to SVOD.

When someone wants to watch a new film that has passed the theatrical stage, before it reaches SVOD services, you have to go transactional. There is no such thing as a dedicated TVOD consumer at a mass-market level, many consumers in mature markets are now SVOD subscribers, some of them might also buy or rent content but only very occasionally.

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Outlook for 4K is positive, but it is still in the early adoption phase

By Ismail Patel, TV Analyst, Ovum

In terms of technology, the shift to 4K is gathering pace. Multiple 4K channels are being launched in Europe and the Far East and, as one would expect, the TV Connect exhibition floor is populated with multiple vendors showcasing their 4K capabilities. As more is invested in 4K by broadcasters and manufacturers, the technology, sets, and services will become more affordable and I believe this will promote a pace of growth similar to that experienced by HD over the last five years.

This positive viewpoint is informed by Ovum’s own research on 4K, which shows that some of the transmission concerns about the technology have been addressed. HEVC is now stable and becoming a realistic option for providers looking at building 4K services – while the cost of 4K display devices has plummeted as volume sales ramped up.

While Ovum remains positive, 4K’s success is not quite a sure thing yet. It is still an early adopters’ market. While prices are coming down and new content is becoming available, devices are still expensive and compelling content remains scarce. Add to that the fact that transmission is only just starting (with high-end bandwidth connections) and it is clear there is still some way to go.

3D was notably absent from the conference – from both the vendors in the stalls and in the presentations delivered. 3DTV, as we have known for the past couple of years, is dead. This was made even clearer as news broke yesterday that Sky's 3D channel will be closed down in June.

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TV is not dead, but has changed beyond recognition

By Ismail Patel, TV Analyst, Ovum

TV is not dead, but has evolved to such an extent that it is now barely recognizable from the days where linear TV was the only game in town. With multiple moving cogs in the industry’s value chain, one of the main takeaways from today’s TV Connect event was that success in the face of this evolution means something different for each player according to where they sit in the chain. In some businesses, new value is being created. In other instances, value shifts from one part of the industry chain to the other. The one constant is that industry players need to adapt to viewer behavior or risk getting left behind.

One key segment identified continuously by TV Connect attendees are the ubiquitous millennials: Those born after the turn of the millennium, who do not know a world without smartphones and the Internet, and do not afford an arbitrary priority to the big screen in the corner of the room over the tablet or smartphone device in their hands.

With this latter point in mind, Google asserted that handheld devices should not be considered “second screens,” but rather “screens providing a different, alternative experience.” It is the behavior of these millennials that will eventually become the mainstream, especially as this generation grows older and acquires more spending power – broadcasters and online TV providers need to continue to react to this.
 

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