Special Report Viewer Watch 2018
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SPECIAL REPORT VIEWER WATCH 2018 ‘New Media?’ No Longer The television industry is adjusting to its maturing digital dilemma BY GEORGE WINSLOW @GeorgeWinslow MULTICHANNEL NEWS began publishing its annual Viewer Watch Special Report in 2006 with an eye of how to make money from video content or craft toward seeing how the changing use of video was transforming the TV business. It is extraordinary what consumer-pleasing products are now central. has happened in the ensuing years to digital media, which was long referred to by executives as “emerging” Given the difficulties many face in turning those and “new media.” old problems into newfound profits, we hope that Early on, they debated some issues that now seem quaint. Should cable networks put their content this report will once again help readers understand online? Was it wise to sell their content to Netflix? Why would anyone watch video of dubious quality the major trends that will impact their businesses in streamed over the internet when they could view it on a beautiful, large TV in this emerging video standard 2018 and beyond. called high-definition? As usual, we are indebted to many people who Often the discussion veered into apocalyptic terrain. Will Google Fiber wreck the pay TV sector? How helped with this report. In addition to the executives fast will cord-cutting destroy the cable industry? Or, alternatively, just how quickly will young people return at pay TV operators, networks, OTT players and to the pay TV fold as they get older and presumably wiser? research firms who generously gave of their time, Over time, discussions of the power — or poverty — of new media have thankfully disappeared. In many research companies also contributed their transcribed interviews with 22 TV executives and researchers for this 2018 report, the phrase “new media” insights and data. Among those, we’d particularly appears not at all — and for good reason. Heading into the New Year, Magna Global was predicting that like to thank Frank N. Magid Associates, Horowitz the digital media ad spend would exceed TV advertising revenues by more than $30 billion in 2018 and Research, Magna Global, PwC, Nielsen and SNL n that it would hit $105 billion in 2019, slightly more than the $101 billion PwC is predicting consumers will Kagan for sharing their data with us. spend on pay TV subscriptions. And those trends make many of the central business and economic issues that have long been the obses- Contributing writer George Winslow compiled the data, con- ducted the interviews and wrote the articles for this report. sion of this report more relevant than ever. If new media has passed into a mature media, the old questions Thinkstock 8 MULTICHANNEL NEWS JANUARY 8, 2018 multichannel.com Why TV’s Golden Age Isn’t a Gilded One As viewers and advertisers shift to streaming, expect the disruption to continue apace IN YET ANOTHER SIGN that digital media has firmly come of age, digital advertising is expected to hit $95.2 billion in 2018, easily eclipsing the $64.0 billion that will be spent on TV. And the digital advertising industry is expected to hit $124.6 billion by 2021 — just three years from now — more than doubling the TV advertising market, according to forecasts from Magna Global. “The economy is doing well, the stock market is high and consumer confidence is good, so total ad sales are coming in high- er than expected,” Magna senior analyst of market intelligence Michael Leszega said. “But when you look closer at the various media, the outlook is not as good. More than 100% of the gain is coming from digital media, and traditional media are declining more than expected.” Video streaming has also firmly established itself as a mass-market phenomenon. Consulting giant PwC predicts total over-the-top/streaming revenue from subscription video-on- demand and transactional viewing will hit $15.3 billion in 2018, while Magna estimates the digital video ad spend will vacuum up another $11.3 billion. That combined total of $26.6 billion exceeds the $23.1 billion PwC expects will be spent on cable Illustrating the rapid growth of streaming video usage, Roku reported that its active accounts hit 16.7 million in the third network advertising. quarter of 2017, up 48% from a year ago, and that streaming hours were up 58% year-over-year to 3.8 billion. “Streaming SVOD services, OTT video … are all part of the way consumers watch video and now a major part of the business,” Howard Horowitz, president and founder of Horowitz Research, said. more like digital companies, with next-generation set-top boxes and video offer- Maturity also brings new responsibilities and some thorny problems. ings, such as Comcast’s X1 platform. “There is so much great content being produced inside and outside of pay TV,” Fake Data? Comcast Cable vice president of entertainment services Daniel Spinosa said. “So For one, data on digital media usage has its downsides, to be sure. In addition our No. 1 focus has been to bring all that content together” with the cloud-based to the hue and cry over charges that digital media platforms such as Facebook and X1 platform that allowed the operator to offer Netflix, YouTube, Pandora and Twitter had endangered democracy by profiting from the proliferation of “fake other OTT content on the same platform as its pay TV lineup. news” in 2017, ad agencies and advertisers also launched pointed critiques of ex- Similar thinking can be found at Atlantic Broadband. Heather McCallion, isting digital measurement and some of the entrenched business practices of both vice president of programming at the Quincy, Mass.-based operator, said its 2013 Google and Facebook. decision to launch the next generation of the TiVo platform has allowed Atlantic In 2017, those complaints prompted a number of major brands to pull ads to launch OTT apps such as Netflix and offer greatly improved search, she said. from Google’s YouTube after reports of their ads showing up alongside extremist “As customers’ perception of a traditional video product dramatically changed, videos; both Google and Facebook also came under fire for the accuracy of their we had to rethink our view of the video product,” she said. data. Separate reports from Pivotal Research Group and the Video Advertising Bureau (VAB) claimed Facebook had greatly overstated the reach of its ads. Flanker Brands The VAB report noted that Facebook metrics showed its ads reach more people Some operators have also capitalized on the rise of OTT video by launching in every state than the actual population of those states. their own virtual MVPDs, such as Dish Network-owned Sling TV and DirecTV Meanwhile, there were some encouraging signs that more traditional TV Now from AT&T’s DirecTV. players were taking major steps to better compete with digital media, improving “With Dish and Sling, we basically have a product for everyone,” Sling vice ad sales measurement and digital products for dissatisfied pay TV subscribers and president of product marketing and management Jimshade Chaudhari said, revamping their technical infrastructures. allowing Dish to reach consumers who want a traditional pay TV experience with On the ad side, “TV is battling back against Google and Facebook with new satellite TV and cord-cutters with Sling. studies showing the effectiveness of TV,” Jane Clarke, CEO and managing direc- Hulu’s expansion from a library of on-demand offerings to include live chan- tor of the Coalition for Innovative Media Measurement (CIMM), said. “They’re nels has also tapped into growing consumer demand for streaming media, vice saying we can show some of the same data for TV that digital can.” president of product Richard Irving said. “We have seen a 98% increase in signups Multichannel video programming distributors are also working to operate since we launched the live product,” he said, along with greater usage. “Since the multichannel.com JANUARY 8, 2018 MULTICHANNEL NEWS 9 SPECIAL REPORT VIEWER WATCH launch of the fall season, with the Pivotal Research Group senior new network programing and research analyst for advertising football, we seen a 70% increase in Brian Wieser said. “You have viewership of live content.” what I suspect is a perpetual CBS Interactive reported that weakness and that is something use of CBSN, its 24-hour stream- the industry needs to be thinking ing news service, was up 35% in about.” the first three quarters of 2017, Other problems stem from the CBSI president and chief operating economics of streaming media. officer Marc DeBevoise said. The Major players are report- jump was particularly notable given ing rapid increases in the use the record-breaking news audiences of streaming video in the third since the 2016 presidential election. quarter. In the third quarter of OTT services are exposing 2017, Roku reported that its active younger viewers to established TV accounts hit 16.7 million, up 48% The cloud-based X1 platform has allowed Comcast to more quickly upgrade its offerings and offer a greatly brands. SVOD service CBS All from a year ago. Streaming hours improved user interface, which the operator says has boosted usage of VOD and electronic sell-through. Access, which has more than 2 were up 58% year-over-year, to 3.8 million subscribers, has an average billion. viewer age of 43; the average age of CBSN viewers is 38. Researchers such as Nielsen are also reporting big spikes in usage. “Adults are “The two products are really younger than the typical audiences and, in that watching about the same amount of video as they had in the prior year, about respect, it strengthens us for the future,” DeBevoise said.