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How OTT Advertising Will Impact Viewing Habits—and Local TV

March 7th, 2018   ||    by John R. Osborn   ||    No Comments

Do buyers and sellers of local TV need to worry about the growth of or streaming video-on-demand (SVOD) and over-the-top (OTT) advertising? While it’s one of the biggest questions in the TV ad world, it’s not to be answered with a simple “yes” or “no.”

eMarketer reported in August 2017 that for the first time, more than half (51.5 percent) of the U.S. population will have Internet-connected TVs—via a smart TV or a TV with an attached device, such as a USB stick or gaming console. That figure will rise to 57.7 percent by the end of 2021.

The Glass Half Empty: OTT Advertising’s Growth

OTT viewers are a subset of connected TV users who stream video content via an app or website that bypasses traditional distribution. Examples are HBO Now, Hulu, Netflix, and even local TV station apps on Roku. Some users maintain their pay TV or multi-channel video programming distributor (MVPD) subscriptions.

However, eMarketer estimates U.S. pay TV non-viewership will grow from 22.4 percent of the adult population to 30.8 percent by 2021—with cord-cutters making up 49.2 percent of those non-pay TV households and cord-nevers another 50.8 percent.

New parent network streaming services like CBS All Access mean local stations will have reduced inventory to sell. CBS announced its OTT offerings have about 5 million subscribers, and that this new, direct relationship with viewers gives it valuable data to drive higher advertising rates.

The Glass Half Full: Local TV’s Value

Much has been written about the value of Local TV programming, especially in the age of Twitter. With automation of the buying and selling process, less friction will lead to more locally targeted ad dollars.

The great news for local stations is that in January 2018, the Advanced Television Systems Committee ( ATSC) announced the release of ATSC 3.0. The new standard essentially marries digital TV distribution to the internet. Local TV can now add interactivity, on-demand functions, data sending and receiving, audience targeting, video and audio upgrades, and the ability to broadcast straight to mobile devices.

Value to advertisers increases greatly with a direct-to-viewer relationship that was missing when stations had no access to set-top boxes.

What to Do Now?

It will be crucial for local TV buyers and sellers to move decisively to fill up the “glass half full” and create new revenue channels aligned with the new distribution channels. This means:

  • Adopt standards: Adopting ATSC 3.0 standards ASAP, along with a data management platform (DMP) that can collect direct viewer data for analysis and merge that data with aggregated data from sources like Nielsen or comScore. This will optimize yield and increase advertiser value for local buys.
  • App support: Making sure every station has apps on emerging video-streaming platforms. Roku, for instance, offers its streamers a plethora of local station apps so cord-cutters can quench their thirst for local and network programming.
  • Change management: Supporting company-wide transitions by investing in change management tools and strategies.
  • Quality check: Remembering that commitment to quality content will best address shifting consumption patterns. Viewers watch programs regardless of how they’re distributed or what platform they’re viewed on.
  • Negotiation: Aggressively negotiating with parent networks to ensure fees and data-sharing adjustments account for viewing and inventory lost to network direct streaming services.

If content is king, then strong technology and an openness to change round out the royal family. And when family is nurtured, change will be natural and exciting—and the table will be set for success.

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