July 2019

Part 1 AVOD

Multiscreen & OTT Series 2019 Multiscreen & OTT 2019 > AVOD Digital TV Europe July 2019

Ad-supported broadcaster such as are among those that believe in the potential of the VOD model.

The rise of the AVODs With subscription costs mounting and the SVOD market becoming more crowded, Jonathan Easton looks at the attractions of -supported video-on-demand.

Netflix added aAmazon Unbox in 2006, which, through be pointed out that it only became a legal When streaming option to its various transformations and name changes, requirement for viewers to have purchased DVD rental service as an optional extra in became what we know as a TV licence in 2016. 2010, few could have predicted that it would Prime Video. In the wake of the iPlayer’s UK success, create the seismic shift that it did in the Other ‘free’ VOD services have also similar services launched in the UK, such following years. sprung up in this time. The BBC launched as ITV Hub and (formerly 4OD). Of course, was not the first BBC iPlayer in 2007 which was, ostensibly, Without the benefit of funding from TV company to offer a subscription-based video freely available to anyone in the UK, paid licence fees, these platforms are, like service. Amazon launched for by the TV licence. Though it should their linear counterparts, free to view but

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94% of the execs believe major platforms This way of looking at the market then in European markets will carry 20% fewer creates a huge gulf between those niche linear pay TV channels than today, with services and the aforementioned likes of VOD being the way to go. Netflix, Amazon and Disney. Such a gap, as Gupta suggests, is the place where AVODs will thrive. State of play Despite rising in prominence recently, AVOD is hardly a phenomenon, as Realistically, we live in a world where most Rhys Nölke, senior vice president strategy OTT households will have one, if not both, and business development at RTL Group of Netflix and . For says: “We were among the frontrunners in many cord-cutters and cord-nevers these advertising-funded VOD offers in Europe. platforms are the basis of their viewing Back in 2007, we launched our first AVOD experience and, as such, will view any new service in Germany, which is called TV platforms as an addition to, rather than Now today. Ever since, we have continued a replacement for Netflix and Amazon. to expand our VOD services in all countries Even Disney – arguably the biggest name where we have strong families of TV in global entertainment – and its Disney+ channels leveraging our platforms across SVOD is likely to live next to Netflix. the Group.” This is okay for Disney, but not everybody There are many audiences across Europe has the name recognition or library of who have only known free to air television. Disney. And Disney only viewed launching For them, an ad-supported model which an SVOD as viable having acquired 20th incurs no financial cost is a more familiar Century Fox and its back catalogue of and appealing proposition than paying for content for US$71.3 billion (€62.59 billion). an SVOD. Even for those who subscribe For Justin Gupta, head of broadcast and to a service such as Netflix or Amazon entertainment, UK & Ireland at Google, the Prime Video, a recent report from Parks market will logically divide between SVODs & Associates suggested that the SVOD and AVODs based on one main key factor. market has become “saturated” and that behind an information paywall and funded “For video platforms and broadcasters fewer viewers are looking to add another by advertising – AVODs. This is a model going direct to consumer, AVOD is the subscription. that is seeing a huge amount of interest obvious choice,” he says. “For niche content Similarly, broadcasters want to best internationally. providers, SVOD makes more sense, in the utilise their extensive content libraries to Safe to say that, over the past decade, beginning at least.” reach as wide an audience as possible while the landscape of video consumption Though there is never a ‘one size fits all’ simultaneously maximising revenue. In has radically transformed. Established rule, Gupta’s description reflects how we this sense, removing the financial barrier broadcasters are looking over their shoulders at the burgeoning competition and are trying to get a piece of the action. “We were among the frontrunners in But for any broadcaster that wants to get ahead in VOD, they are posed with several advertising-funded VOD offers in Europe. different questions. First do they licence Ever since, we have continued to expand our their content to one of the big players, or do they decide to go direct to consumers? VOD services in all countries.” Should they settle on the latter, what model Rhys Nölke, RTL Group for revenue should they follow: the free-to- view AVOD or a paid-for SVOD? have seen the OTT landscape take shape to entry of a subscription from audiences And these are the questions being asked over its first decade or so. More specialist has the potential to increase viewership, by the entire industry amid an increasing services which could be considered, as making AVOD such an attractive model. shift to non-linear programming. According Gupta puts it, ‘niche’, are thriving. , while still being largely dedicated to the European edition of the 2019 Pay-TV For example, both anime platform to pay TV and cable networks, is one such Innovation Forum from Nagra and research and pro wrestling service WWE broadcaster that has heavily invested in consultancy MTM, 79% of executives feel Network boast over two million members the AVOD space. The company grabbed that these rapidly growing OTT services each worldwide. Both have been disruptive, headlines in March 2019 with the US$340 present a major opportunity to become both serve a core niche audience, and both million (€298.45 million) acquisition of ‘super-aggregators’ of content. By 2024, are subscription-based. Pluto TV.

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Zattoo brings white label TVaaS to Android TV Operator Tier market

oogle has achieved significant success over the last couple of Kleemann says that has found a partner for the initiative that years for Android TV on the back of its Android TV Operator Tier can deliver a “perfect combination” of a high-specification system-on- Gprogram. TV operators have been able to tap into Android TV chip platform at “a very competitive price”, opening up the market to a to deliver fast time to market, enable access to Google Play and provide new range of operators that may not be as well-resourced as tier-one the potential to deploy advanced set-top boxes at an affordable cost, players. while allowing them to retain control of the look and feel of their service. “We have a good, strong partner with a solid roadmap that can While Android TV for operators has simplified the business of launching move very quickly and efficiently,” says Kleemann. According to a pay TV service, operators have until now still needed to source a Kleemann, that roadmap means that operators will benefit from a clear device manufacturer to supply a set top box and also an experienced path to upgrade to next generation devices, giving them certainty integration partner to launch the service. This potentially involves that they will be able to keep up with changes to Android TV without significant cost, time and complexity. needing to allocate lots of resources to achieve this. Zattoo is currently Step in multiscreen technology provider Zattoo, which is now taking offering a pure IP solution, but plans to follow up with a hybrid box its TV-as-a-service concept to Android TV, enabling operators to get to including broadcast tuners later. market quickly by providing a white label 4K set-top solution that relieves As part of its TVaaS service – and part of the Android TV operator clients from the burden of developing and integration of a their own tier program – Zattoo has also upgraded its content discovery and launcher applications. “Network operators are opting more and more for VOD offering. According to Stefan Tiess, product manager of Zattoo’s set-top boxes powered by Android TV as an discovery squad, the first goal of what alternative to Linux-based set-top boxes, so Zattoo has branded Discovery 2.0 is to we had two main objectives. The first was to enable viewers to search for and select offer Android TV as a white label offering as content via a single interface across linear part of our TVaaS platform. and non-linear channels, recordings and The second was to satisfy the “all kinds of VOD content”. requirements of existing and future B2B Second, he says, content discovery customers,” says Franziska Kleemann, should be personalised. To enable this Product Owner for Android TV Operator Zattoo has introduced recommendation Tier at Zattoo. Kleemann says that one of based on previous viewing behaviour the challenges operators face in getting across all types of content that users can to market quickly is to find a suitable access. Zattoo’s content discovery portal, manufacturer to not only supply their which is powered by a recommendation set-top boxes but also manage the entire system that was built in-house, taps integration effort. With a ready-to-roll white label solution from Zattoo, machine learning algorithms that are extendable across all types of operators can rely on a trusted partner to do most of the heavy lifting, content, most recently with the addition of transactional VOD and says Kleemann. “Operators can select a fully brand-able, 4K set-top box electronic sell-through content to the mix. “Previously we had distinct product from us without any need to go and find a device manufacturer areas for recordings and catch-up and TVOD content that are now of their own,” she says. “They won’t face the potential minefield of combined in one overarching discovery experience, allowing operators incurring unforeseen costs if they don’t find the right partners.” to provide their own on-demand offerings on the same page as other Zattoo has focused on meeting the needs of most medium-sized content,” says Tiess. Discovery 2.0 is included by Zattoo in its Android operators and delivering a consistent user experience. “We see a lot of TV for operators white label offering, providing operators with an interest both from existing and new customers. Our product is a fully additional incentive to sign up. white label offering. We guarantee performance. It is part of our larger “We are proud to once again be an innovation leader in this industry, TVaaS solution with white label TV applications available to more than especially when it comes to Android TV for operators,” says Nicolas 15 device platforms. Operators get the benefit of our back end, hosted Westermann, head of B2B product at Zattoo. “We are already one of video headend, the CDN and new features and developments in content the leading TV platforms for network operators in Europe and we are discovery and video-on-demand,” says Kleemann. The apps available delighted to have formalised a partnership with one of the world’s from Zattoo as part of its Android TV offering include content discovery, leading manufactures when it comes to Set Top Boxes powered by network DVR, restart, startover, series record and time-shift TV. “Because Android TV. We are very excited about what this new product will bring we are offering this as a white label service, operators can get a unified to our offering and also the experience our new Content Discovery and and consistent experience across all manner of big screen,web, game VOD features will provide to network operators and their end users consoles and mobile devices.” throughout Europe and further afield.”

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Right: Viacom-owned Pluto TV has over 15 million monthly users worldwide

The service, which boasts over 15 million users worldwide, is ad-driven and does not offer a premium option, unlike the likes of and ITV which let users pay a fee for an ad-free experience. Certainly, that a company as established and the size of Viacom is so heavily invested in a purely AVOD offering shows that it is a viable option in the OTT space.

Hitting the target

Olivier Jollet, managing director, PlutoTV Europe, believes that the AVOD model presents unique revenue opportunities not available with SVOD or even with the short- “The Pluto TV platform is equipped with precise insight into their viewers. While form advertising offered by YouTube and opportunity to serve as a cross-promotional broadcasters have traditionally relied on social media. vehicle to market Viacom’s library and monitoring from companies including “For advertisers, a non-skippable services with future ability to upsell targeted Nielsen and Kantar to see who is watching, environment plays an important role and subscriptions services and products.” modern internet tracking technologies – distinction for AVOD. Full screens are The tangible results that come from the cookies – give a much fuller perspective very important for advertisers especially on measurement and targeting of advertising of the individual viewer along with their TV sets. The value is completely different are the key reasons why broadcasters are habits and interests, and deliver tailored than a video ad in a newsfeed. At Pluto TV, champing at the bit to create their own advertising that is much more relevant to we offer a unique proposition to advertisers platforms rather than simply license their them. where we can create customised channels programming. Jollet agrees with this, surmising: “We and programming blocks that use curated As Gupta points out, “we’re gradually used to have two worlds in the advertising content to reflect a particular theme or moving away from the paradigm where world. The TV budget world with a message to targeted audiences.” every viewer sees the same ad break – strong focus on brand awareness for the This, combined with the ‘super- and that’s a byproduct of how TV was advertisers, and the digital world with a focus on conversion and engagement. AVOD platforms where most of the usage “Full screens ads are very important for is taking place in the living room, such as Pluto TV, are bringing the best of both advertisers especially on TV sets. The value worlds together: TV-like inventory with the is completely different than a video ad in a measurement and targeting capacities of the digital world.” newsfeed. ” This is a view shared by Chris Oliver Jollet, Pluto TV Bassolino, co-founder and COO of Zype, a video content management and video aggregator’ aspect touched upon earlier, is distributed, with everyone seeing the same distribution infrastructure provider, and the reason why Viacom invested. programmes. Nowadays, as people can its customers include Fascination TV and “For Viacom, Pluto brings a scaled direct- view different content over the internet, Shout! Factory TV. to-consumer offering with opportunity to they can also view different ads – both in “For advertisers, it is a very addressable capture the white space in the ad-supported video on demand and with live broadcasts space. The platforms have access to the streaming market. It adds an important – which gives the ability to do addressable user bits first-party – which is great for offering for distribution partners, unlocks advertising, in a similar way to how ads are advertisers and targeting,” Bassolino says. their deep library of content, enhances delivered on the web. So the uniqueness is “For investors, at the end of the day it is a the advanced advertising capabilities, the ability to do more granular targeting of media play with a heavy reliance on ad tech and creates global reach using Viacom’s TV adverts.” and ad stack management, so making sure established international footprint,” says This granularity allows the operator the platforms have a competitive advantage Jollet. a greater degree of controlled and or scale there would be essential.”

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TV Now, RTL’s German VOD service, launched in 2007

“The core value proposition for advertisers speaks to a new platform that adds to the existing video advertising landscape. AVOD reaches viewers who diversify their media consumption and are viewing more and more digital content on connected devices rather than Broadcast TV only,” he says. Gupta agrees that this value proposition is of immense value to advertisers and broadcasters. “Advertisers want to reach viewers across different platforms – and AVOD finally creates the ability for them to reach viewers on TV as well, potentially even from the same programmatic campaign. It’s also much easier to do regional campaigns or target smaller niches of viewers,” he says. “It also gives advertisers the capability While this might sound as though the he says. “Right now we have a whole to start doing ‘creative storytelling’ and benefit to advertisers is expanding and generation of young people conditioned by showing different creatives to the same maximising their potential reach, analysts YouTube to watch – and skip – ads, and a viewer over time. One example could be for view advertising in the AVOD space to be whole generation of older folks who grew a car advertiser. The first time you show the much more focused on the quality, rather up with broadcast TV and the DVR. outside of the car, the second time you show than quantity, of views. “It will always be a cat and mouse the inside of the car, the third time you This is one such view held by Tim game, but the publishers and broadcasters show the dashboard, the fourth time you Mulligan, research director and video that engage with great content at scale, show the price and the fifth you provide a analyst at MIDiA Research, an analysis and with ads that have contextual relevance call to action to a local dealership. insights firm focused on the crossovers to the audience, will do well across any “For broadcasters, you can now sell between media and technology. Says demographic.” your VOD advertising across all screens in Mulligan: “AVOD allows ad-supported TV Going forward, it would seem that AVOD one place and use your first party data to content to exist and potentially thrive in the is going to do nothing but grow. Its benefits make your ad inventory more attractive to streaming era because, whereas previously are obvious and, save for particularly data- advertisers, supporting the targeting and TV sold itself on reach metrics such as the cautious viewers, each party wins. Viewers creative rotation use cases described above.” estimated size of its audience,” he says. get a huge library of on-demand content “Now, AVOD is able to accurately quantify to watch at their leisure in exchange for a through data its audiences for advertising few minutes of ads, distributors get their The personal touch partners, creating better ROI and far greater content seen by a wider audience and accountability.” advertisers have a new, highly targeted way RTL has heavily invested in targeted While much of the emphasis the industry of reaching consumers. advertising, with the full purchase of ad places on AVOD is down to its appeal to However, Mulligan points out one reason serving platform SpotX in 2017 and the advertisers, what should not be overlooked for caution that is often overlooked: “There US$33 million (€29 million) acquisition of is how warmly the audience, and certain is no more untapped attention. Newly advertising technology company Yospace. demographics, receive it.” launching media services now need to “With our recent acquisition of Yospace Gupta says: “It’s definitely the case that compete directly against incumbents and we have acquired one of the most advanced younger viewers are more willing to watch the ones who succeed will be those that technologies for Server-Side Dynamic Ad ads and less willing to subscribe.” offer a substitute for traditional TV, with live Insertion (SSDAI),” notes Nölke. “This allows Nölke agrees with Gupta’s sentiment: sports and live news being the big gaps in the replacement of existing commercials “With video-on-demand services we the current DTC landscape.” from a broadcast stream with more targeted, generally reach younger target audiences For now, we live in a time of near-endless personalised advertising. Yospace’s technology and AVOD extends our existing TV offering opportunities for operators, but those which makes advertising on streaming services more with additional targeting opportunities – in decide to move into the space must ensure personal, which means a better consumer a premium and brandsafe environment.” they have a compelling package to attract experience for superior monetisation of our Bassolino however is less conclusive. advertisers and enough content to engage premium advertising inventory.” “ think the story is still being written,” with viewers. l

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