YouTube TV rockets to top of vMVPD list in 2017

YouTube has been spending big to promote its vMVPD service. According to the latest data from TiVo, the service was used by 9% of consumers in Q4 2017. That would make it more than twice as big as its biggest rival.

YouTube TV ad blitz working

YouTube TV has been on an ad blitz for the last several months. The service was a very visible sponsor of Baseball’s World Series, spent big on other TV ad campaigns, and is doing more of the same this year. It is also advertising extensively to regular YouTube users. According to TiVo’s new Q4 2017 Video Trends Report data, the marketing spending is paying off.

TiVo added YouTube TV to the quarterly survey for the first time in Q4 2017. An amazing 9% say they use the service. The next nearest service, DirectTV Now, has less than half of YouTube TV’s total, and Sling TV has less than a third. We should perhaps treat the YouTube TV number cautiously. It is possible some survey respondents confused YouTube TV with YouTube on TV. That said, even if YouTube TV has just half the number of users as TiVo indicates, it is still the new category leader.

The TiVo numbers suggest the size of the vMVPD market could be much larger than the 4.5 million estimated. Dish Network reports that Sling TV has 2.2 million subscribers. YouTube TV could already have more than 4 million subscribers, and it could also mean the total number of vMVPD subscribers is almost double the previous estimates.

SVOD continues its inexorable advance

TiVo’s data says that SVOD continues to grow in all dimensions. 68% say they use an SVOD service, up more than 4% over the previous year. Netflix continues to dominate, with 55% saying they use the service. 26% use Amazon Prime Video, 17% use Hulu, and 6% use HBO NOW.

Spending on SVOD services increased strongly. The number of people spending more than $15 a month increased from 27% in Q4 2016 to 35% one year later. However, it could be vMVPDs that are driving this number, rather than people subscribing to multiple SVOD services. Only one vMVPD, Sling TV, has a tier below $21 a month. The rest charge $35 or more per month. The increase in the number of people spending over $21 a month was 9%, with 7% paying over $30.

Time spent with the services also increased. 93% of people that subscribe to SVOD services say they use the service every day, 3% higher than two years ago. As well, the number of people that say they use their service for less than 1 hour a month decreased 10%, to 12%. Meanwhile, those using their service for 2 hours a day or more increased dramatically. A third say they watch their SVOD services for more than 3 hours a day, and almost a half watch from 1 to 3 hours per day.

TVOD continues its slow drift downwards

Transactional VOD continues to struggle in the digital era. The number of people saying they had rented or purchased a movie or show online declined slightly over the last year, to 37%. Amazon maintained and slightly extended its lead, with 18% saying they used Amazon’s video store in Q4 2017. Redbox kiosk users fell slightly to 13%. Apple also lost a little ground to Amazon, with only 8% of saying they used iTunes in Q4. Google Play looks as though it may overhaul iTunes this year. It gained slightly more users and is only a little behind iTunes.

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TV Can No Longer Avoid The Viewability Challenge

by Dan Schiffman

The echoing three-count drumbeat of transparency, fraud and viewability has amplified the din of the digital marketing cacophony. The challenges these issues present have proven so strong that some agency holding companies are voluntarily superseding industry minimums by setting higher thresholds for quality delivery than what the standards bodies recommend. Blame it on a hungry set of publishers, ad tech vendors, and anxious marketers, but the high level of noise is finally getting quieted by folks like Marc Pritchard at P&G who are leading the charge to make the digital landscape accountable for media placement.

TV has fallen to the number two slot in media spend — having made it over 75 years without having to own up to who actually saw an ad displayed on their television set. The famous John Wanamaker quote – “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half” – was born for the print world and easily translated to TV. While the digital ecosystem can very accurately understand who specifically saw an ad and for how long, the more mainstream impression-based media placements got a hall pass from having to tie an impression to a consumer, and a consumer to a sale.

Eyeballs, Meet Impressions

That time is changing though. If digital has suffered the recent wrath of detailed measurement, that approach is starting to make TV look woefully unprepared for modern marketing management. The multi-front war – for attribution, targeting, and personalisation – weighs against the current TV ad measurement approach. Layer in OTT, addressable TV, and connected TV data, and the issue shifts from offence to defense for advertisers interested in measuring which messages resonate.

There are two dynamics at play here. The first is the knowledge of whether the TV was being watched when it was “on.” For any of you with kids, dogs, and multiple TV sets, there are many times that the TV is on but no one is watching (never mind the many times that the TV screen is off but the set top box does not know that). The second is, assuming their is a beating heart in the room, who that person is and are they using the TV for background noise.

The way it works today, viewability on TV is measured by completion. If the program or ad shows in total based on set-top box or Smart TV data, the assumption is that it was seen in its entirety. But think about the number of screens in your house, and which one you or your family are looking at when the commercials come on. If you are actively watching TV, chances are good that you are also actively changing the channel. If you are not paying attention, those ads are probably playing out entirely. So the correlation between 100 percent airplay and 100 percent viewability is not what it seems, and may actually be the reverse.

The important part of the above chart is the delta between standard GRPs and those weighted by attention. This measurement of viewability is powerful in that it answers the question of not just who tuned in, but who is actually watching the show. For broadcasters and pay TV operators, this could translate into better ad prices. For advertisers, it’s a better media plan and likely better link to brand and sales lift.

Ratings Still Matter

Let’s be clear. Ratings are a critical measure of interest, audience reach, and value of the spot placement. But as Dave Morgan of Simulmedia has consistently pointed out, ratings and audience sizes are decreasing as the volume of content is fragmented across broadcast, cable and over-the- top viewing channels. So a show with a lower rating and a high attention score may actually drive more impact than a highly rated show that is on in the background. The two measures need to work together to prove the viewable impact of a TV ad.

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UK TV advertising slips back year-on-year

Even though it did not quite hit the highs set two years ago, nor indeed 12 months earlier, the UK’s advertising market generated £5.11 billion in revenue in 2017, according to survey data from Thinkbox.

The association of UK commercial broadcasters said the figures represent all money invested by advertisers in commercial TV across all formats and on any screen: linear spot and sponsorship, product placement, broadcaster VOD, addressable and interactive.

The data showed that the annual decrease compared with 2016 came after seven consecutive years of growth in the UK, caused mainly by ongoing economic and political uncertainty, with a weakened pound and inflationary pressure leading some advertisers to reduce TV investment, notably FMCG advertisers. Yet according to data from Nielsen, FMCG spend on TV advertising in Q4 2017 grew by 8% compared with the same period in 2016. And figures from the UK broadcasters suggest that Q4 2017 saw an approximate 2% overall increase in TV spend year-on-year. The Advertising Association/WARC predicts that TV advertising in the UK will return to annual growth again in 2018, forecasting a 1.5% increase in total investment.

Thinkbox also found that, according to Nielsen data the top five TV spending categories in 2017 were: online businesses: £682 million (0.3% down year-on-year); food, which generated £559 million (-11.4%); cosmetics and personal care with £431 million (-2.4%); entertainment and leisure generating £385 million (+1.6%); and finance, capturing £324 million (-3.1%).

Commenting on the results, Lindsey Clay, chief executive of Thinkbox, said: “Post-recession, TV advertising in the UK had seven consecutive years of growth. But TV hyper-reacts to the economy, good or bad, and recent uncertainty saw growth stall in 2017. That growth is now returning. The pendulum is swinging back to TV. We have more proof than ever that TV advertising drives business growth and outperforms all other forms of advertising. TV is a proven, trusted, high quality environment for brands. And TV’s strengths and unique assets have been thrown into even sharper relief recently following the much-publicised scandals and loss of trust in some areas of online advertising. Advertisers are re-assessing where they advertise and TV is well placed to capitalise.”

Three Strategies to fight Netflix

In just a few years’ time, the way we consume entertainment has changed drastically. Netflix and other video streaming services have taken the industry by storm, encouraging consumers to cut the cord and enjoy their content on demand. In fact, last year Netflix users collectively watched 1 billion hours of content each week, and more than 22 million U.S. adults were expected to drop cable services, up 33% from the previous year — a major blow to cable companies.

With streaming on the rise, how can cable outlets keep their current customer base coming back?

Stay Transparent

Open communication is key to maintaining a healthy customer relationship. When it comes to set-up fees, service upgrades or any extra charges, cable providers should be up front about a customer’s tab.

Unexplained price increases are a common cable customer gripe, and with monthly charges up an average of 53% in just a decade, according to S&P Global Intelligence figures cited by the Associated Press, customers are turning to alternate options. Nobody likes seeing an unexpected uptick in their monthly bill — be prepared to explain why things may be changing, and it’ll go a long way toward maintaining customers’ trust.

Tap New Revenue Streams

Who doesn’t like a healthy bottom line? By offering a valuable benefit like customized consumer electronics warranty products for TVs, gaming systems, laptops and more, cable companies can give current customers another reason to stay on board. Include this protection in a customer’s overall package, and you become much more than just a cable provider — you’re a one-stop shop for devices, service and coverage. Plus, you’ll be adding another line of revenue.

Don’t Be a Robot

While consistency in messaging is important when communicating with your customers, train your service reps to avoid being robotic in delivery. Sure, everyone has a script to read, but a simple gesture like asking the customer how their day is going can make a tremendous difference in the tone of a service call.

That interaction can have effects beyond one call as well. Angry customers aren’t hesitant to post bad reviews or recorded conversations online, potentially affecting your reputation. Take Comcast for example, where $300 million was pledged toward an updated customer service strategy. After multiple complaints, the cable giant promised customers incentives like $20 if a representative is late to an appointment, and a redesigned monthly bill to better answer customer questions.

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U.S. cable, satellite and telcoTV lost 3.5 million subs in 2017

Cable, satellite, telcoTV all lose subs

The traditional pay television industry in the United States had its worst year ever in 2017. The top seven public companies, which jointly account for 85% of pay TV subscribers, lost 3 million residential subscribers. If this 3.7% decline holds true for the operators serving the other 15% of subscribers, the industry will have lost 3.5 million subscribers.

Telco TV faired the worst in the year. AT&T U-verse lost 17% of its subscriber base. The huge loss is primarily attributable to the fact that AT&T is working hard to retire the service, pushing subscribers to switch to DirecTV and DirecTV Now. Verizon FiOS lost 1.6% of its pay TV customers.

Satellite operators lost 5.4% of its customers. Dish Network subscribers lost 10.3%, down an amazing 1.14 million. DirecTV lost 554,000 customers, or 2.7%, despite AT&T making a huge marketing push to bring U-verse customers to the services.

Cable held up the best in the face of this broad overall decline. Comcast, Charter, and Altice jointly lost 1.1% of their video customers. Comcast had the lowest overall decline, losing just 0.8% of subscribers. Charter was down 1.8% and Altice down 3.8%.

The X1 bubble has burst

Last year, Comcast enjoyed the first full year of growth in pay TV subscribers in 10 years. The company gained 103,000 subscribers. The company’s market-leading X1 service seemed to be doing a great job attracting disaffected subscribers from other pay TV services. Showcases such as the Rio Olympics, which Comcast integrated into a unique experience on X1, did a great job of marketing the service.

In 2017 far more customers left rival satellite and telcoTV providers than in 2016. Unfortunately for Comcast, most appear to have left traditional pay TV altogether rather than switching to its premium X1 experience. As my podcast partner Will Richmond remarked to me last week, it seems like Comcast has already won all the customers that would want its high-priced TV experience.

vMVPDs enable an exit from high price plans

The biggest beneficiary of the massive decline in traditional pay TV is the new online virtual MVPDs. The existence of services like Sling TV and DirecTV Now is a major reason many people now feel they can live without their cable or satellite company. Before these companies existed, it was impossible to get content from channels like ESPN and TNT without pay television. Now, a $20 a month subscription to Sling TV provides both.

Dish Network reported that Sling TV gained 710,000 subscribers in 2017 to reach 2.21 million. DirecTV Now reached the 1 million subscriber mark in December, impressive performance by the barely 1-year-old service. Overall, vMVPDs have about 4.6 million subscribers or about 5% of total MVPD subscribers.

Compared to traditional pay TV, the vMVPD business is terrible. nScreenMedia estimates that even after YouTube TV’s $5 price increase the service is barely breaking even. The same is likely true at other providers, like DirecTV Now. However, none of the major vMVPDs show any sign of backing away from their aggressive pricing. Linear television services are part of more important strategic initiatives that make low or non-existent profit margins tolerable for companies like AT&T and Google.

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Launch F1 TV OTT streaming service

Formula 1 is set to launch F1 TV, a live Grand Prix subscription service, early in the 2018 FIA Formula 1 World Championship season.

F1 TV is Formula 1’s over the top (OTT) platform and marks F1’s biggest investment in its digital transformation to date. Pricing for F1 TV Pro will be offered on a monthly basis of between $8 and $12, and annual rates will be priced according to market.

F1 TV will offer commercial-free live streams of each race with multi language commentary. In addition, the service will provide access to all 20 driver on-board cameras throughout every race session. F1 TV Pro will have unique feeds not available on any other platform with the capability of multi-level personalisation.

Subscribers will be able to choose the content they view and how and when they access it. All of practice, qualifying and races, will be offered live, along with press conferences and pre and post-race interviews. Subscribers will be able to watch live races of the main support series, the FIA Formula 2 Championship, GP3 Series and Porsche Supercup, among others.

During the season, F1 TV will be made available in four different languages (English, French, German and Spanish) and will appear in nearly two dozen markets at launch (including Germany, France, USA, Mexico, Belgium, Austria, Hungary and much of Latin America). Access will initially be available through desktop and web, with mobile apps and TV apps being phased in on Amazon, Apple and Android.

A less expensive, non-live subscription tier, F1 TV Access will provide live race timing data and radio commentary, as well as extended highlights of each session from the race weekend. It will also be underscored by unprecedented access to archive video content from the historic archive owned by Formula 1. F1 TV Access will be available on a near-global basis at launch, to complement F1 TV Pro.

CDN and connectivity services to distribute the F1 TV content globally will be supplied by Tata Communications, Formula 1’s Official Connectivity Provider.

“With the launch of F1 TV, we are beginning on the journey to build a cornerstone of our digital transformation. F1 TV subscription products are clearly and centrally aimed at our hardest core fans, and we are firm believers that while we are bringing a new audience to the sport, we must always remain focused on delivering products and experiences that serve the most avid F1 fans,” said Frank Arthofer, Director of Digital and New Business, Formula 1.

“Our objective with F1 TV is simple: provide these fans with the best available service to watch live Grands Prix and provide them with the best sports OTT customer experience in the world. Our team and our partners are singularly focused on delivering on that vision: not just for launch but over the long-term. Live streaming video is an exciting space changing almost daily.”

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Study: Growing consumer desire for aggregation

Findings from The Best Bundle: Consumer Preferences in a Peak TV World from Hub Entertainment Research point to increasing consumer frustration with the rapid expansion of TV viewing options.

Highlights from the study:

– Consumers find themselves forced to create their own TV bundles to satisfy their needs: Only those who subscribe to at least three TV services (pay-TV, SVoDs, virtual MVPDs, etc.) are more likely than not to feel that their viewing needs are “very well met”.

– But the work required to choose between services is becoming more onerous: Only 22 per cent say that the growing number of TV services makes it “easy to choose what’s best for me” (down 11 points, from 33 per cent in 2017).

– This is driving consumers to lean toward providers that offer aggregated solutions: Among those with a preference, more than twice as many would rather access all their TV content from a single source (69 per cent) than access sources individually (31 per cent).

Even with an aggregated solution, viewers only want to pay for the content they know they’ll watch: Consumers would overwhelmingly prefer services that let them choose and pay for just the networks they want (43 per cent) over services that offer a large number of networks in a pre-set bundle (10 per cent)—even if the larger bundle means a lower cost per network.
“The novelty of having so many options for TV content is wearing off. Now consumers want simplicity and efficiency,” said Peter Fondulas, principal at Hub and one of the authors of the study. “Bundles that aggregate content from multiple sources are highly desirable – but only if those bundles include little or no content they know they won’t watch.”

“Consumer preference for an à la carte TV offering has never been higher,” said Jon Giegengack, co-author of the study. “It’s not the price of traditional big TV bundles that turns consumers off, so much as how much of what they pay goes to content they don’t use. Viewers would rather have a bundle comprised of just the content they care about – even if it means they have to pay more for each network”.

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Roku transitions to an ad-driven business

Roku had a very strong finish to 2017, with strong growth in active users and revenue from its platform business. The company seems well positioned to take advantage of the expansion of the online TV market, despite a tightening streaming media player market.

Q4 2017 sees strong growth in Roku’s key strategies

One of the key strategies for Roku is to grow the base of active accounts. On that basis, 2017 was a very successful year. Active accounts increase 44% year-over-year (YoY) to 19.5 million. The amount of streaming time also increased sharply, up 54% to 4.3 billion hours. However, on a per active subscriber basis, viewing was flat over the previous quarter, though up from one year ago. In Q4 2017, the average active user streamed 2 hours and 25 minutes per day. In Q3, average users streamed 3 minutes more and in Q4 2016 16 minutes less.

Player market tightens

In the earnings call and the investor letter, Roku was clear that it does not view player sales as a key engine of revenue growth for the company. The player is a tool to help the company expand its user base:

“Our primary focus in selling players is to increase active accounts; we are not focused on maximizing hardware revenue and hardware gross profit.”

In an ultra-competitive market like streaming media players (SMPs), there is little opportunity to charge a premium price. Apple is trying with Apple TV but not seeing much success. Roku lowered the price of its premium player, the Ultra, from $129.99 to $99 in the fourth quarter. That help to boost unit sales volume by 25%, according to Roku’s CFO Steve Louden, but led to a 7% decline in player revenue versus Q4 2016.

Even though rivals are selling their SMPs at close to cost, Roku continues to make 9.5% gross margin on its player business. Last year in the same quarter gross margins were 13.3%. Expect margins to continue to tighten this year.

Platform revenue surges driven by advertising

Platform revenue continues to grow strongly. It grew 129% YoY to $85.4 million in 2017. It accounted for 45% of total revenue, up from 25% in 2016. The company expects it to overtake platform revenue in 2018. 75% of platform revenue comes from advertising and 25% from platform licensing.

Though it does not provide much revenue, license sales are an essential part of Roku’s strategy. Most importantly, the company continues to win over smart TV manufacturers and help them sell TVs. Anthony Wood, Roku Founder and CEO, says that: “1-in-5 smart TV’s sold in the US in 2017 were Roku TVs.” He later commented that half of the new active accounts came from licensed sources.

2017 was the first year that smart TV sales exceeded streaming media player sales. Roku’s strong footprint in the smart TV and SMP markets positions it well to continue to drive the expansion of active users throughout 2018 and beyond.

The success of The Roku Channel is helping drive ad revenue growth. The free ad-support channel launched late last year and is already the third most popular ad-supported channel on Roku. Mr. Woods was clear about the importance of ad revenue to Roku’s future:

“We are increasingly tapping into the $70 billion that US advertisers spend on TV as the TV ad ecosystem moves online.”

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Study reveals strength of mobile video ads

New research from respected marketing science academic Professor Karen Nelson-Field has uncovered new insights into how and why video advertising works for brands when viewed on mobile devices.

The ‘mobile edition’ of Professor Nelson-Field’s ongoing Benchmark Series, commissioned by Australian commercial TV advisory resource ThinkTV, makes a number of significant findings that are designed to help advertisers and their agencies get the best out of video advertising.

Professor Nelson-Field used bespoke AI machine-learning technology and eye-tracking software to minimise human bias in her team’s data gathering.

The latest tranche of the Benchmark Series seeks to compare the sales impact and attention generated by video advertising viewed on mobile devices on Facebook, YouTube, and TV (over Broadcaster Video-On-Demand services).

It found that:

1. Advertisements viewed on mobile devices by consumers of Facebook, YouTube and Broadcaster Video-On-Demand (BVoD) all generated a positive sales impact for brands.
2. On mobile devices the sales impact of BVoD is 33 per cent higher than Facebook and 17.5 per cent higher than YouTube.
3. The sales impact of TV outperforms Facebook and YouTube irrespective of screen.

Key findings:

Sales Impact

Using the well-established metric of short-term advertising strength or STAS (Short-Term Advertising Strength) to measure the impact an advertisement has on sales, the research found that BVoD on mobile devices performed 17.5 per cent stronger than YouTube and 33 per cent stronger than Facebook.


The same pattern carried for attention, which Professor Nelson-Field scored out of 100 based on the results of eye-tracking measurements. On an aggregate of these measures, BVoD scored 63 points out of 100. That was 9 points higher than Facebook, which scored 54, and 19 points higher than YouTube, which scored 44.

TV wins on every measure

Professor Nelson-Field found that the sales impact of TV outperformed YouTube and Facebook irrespective of screen. So TV, whether viewed on a TV screen, computer or mobile device, delivered a significantly stronger result than both Facebook and YouTube on those platforms’ best performing screen, mobile.

Screen Coverage

The study found that screen coverage (the percentage of a screen occupied by an ad) was highly correlated to attention and sales, in line with previous findings from the Benchmark Series. On this measure, TV, at 100 per cent screen coverage, provided almost four times more screen coverage than Facebook and three times more screen coverage than YouTube, which Professor Nelson-Field identified as one of the key reasons for TV’s ability to have the most impact on sales.


Professor Nelson-Field explained that because mobile screens tend to be held closer to the viewer’s eyes their peripheral vision adjusts to the screen proximity, which means that passive viewing on mobile is worth more to sales than passive viewing on other devices. (N.B. Professor Nelson-Field did not investigate other factors in advertising success such as the impact of reach and reach velocity.)
“In the first tranche of the Benchmark Series when we measured YouTube, Facebook and TV on PC, as well as TV on the TV set, we could clearly see why certain platforms drive higher levels of attention and greater levels of advertising impact than others,” explained Nelson-Field. “And in simple terms this is about visibility.”

“Now with mobile devices increasing in importance for video viewing, we can see that ALL platforms benefit from the lean-in viewing experience. Of course, as we predicted, those with better inherent ad visibility still benefit more.”

“This study takes the Benchmark Series a stage further; digging into the fast-growing world of mobile,” noted Kim Portrate, Chief Executive of ThinkTV. “It proves video advertising on mobile screens works on all of these major platforms – as more people lean in to their content choices – but it also shows that not all media is equal on mobile.”

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TiVo: 20% of time spent consuming video

According to findings from entertainment technology and audience insights specialist TiVo, the average global viewer spends 4.4 hours each day watching video. Coupled with the global average of 28 minutes spent each day searching for content to watch, that is nearly five hours per day of video engagement, which amounts to 20 per cent of daily life, building à la carte entertainment experiences that work best for them.

The company’s annual multi-country Global Consumer Trends study explores viewer engagement with the video content, services and devices that shape the evolving consumer entertainment experience.

The study also found that about 90 per cent of households are currently paying for traditional pay-TV service. However, more than 60 per cent are also subscribing to streaming video services such as Netflix, Amazon Prime and Hulu.

In the US, more than 50 per cent of pay-TV subscribers have been with their service for four years or more. Subscribers with the shortest tenure are also the least dependable: more than 10 per cent of those who have subscribed to cable for a year or less say they’re very likely to cut the cord in the next six months.

It’s not just the amount of content that has exploded in the last few years. People now have more screens than ever at their disposal to watch their favourite videos. Nowhere is this truer than in Latin America, where 50 per cent of all viewing now takes place on a digital device other than a television set, according to the study. By way of comparison, viewers in the US say that more than 75 per cent of their video consumption still occurs on their TV.

“Consumers today are acting as their own aggregator, piecing together what they need from a variety of video service and device combinations to suit their individual needs,” said Paul Stathacopoulos, vice president, Strategy, TiVo. “Success in this new environment will not be about a single content source monopolising the living room, instead it will be about adapting the business model to deliver value, integrated services and personalisation to meet the evolving consumer needs.”

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