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The State of Video Monetisation 2019
Ad revenues are up, but challenges with measurement and subscriber churn remain
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Multiple efforts are underway to bridge the gap between the sample-based methods used for measuring broadcast audiences and digital measures of multiscreen viewing.

In the UK, the Broadcasters Audience Research Board (BARB) finally released Dovetail, its multi-screen project. But it was only part one of a three-phase introduction, with dates of rollout for parts two and three still to be confirmed. The phase it has launched is to report multi-screen programme ratings across TV, tablets, PCs, and smartphones.

To do this, BARB is now combining census-level data from software embedded in broadcaster-operated VOD services like BBC iPlayer with cross-device panel data from its panel of 5,300 homes.

Phase two will report the extent to which tablets and PCs increase the number of viewers and average weekly viewing time for BARB-reported channels; the final stage of the process, multiple-screen advertising campaign performance, is in development but requires the co-operation of service providers like Amazon and Netflix—co-operation which has not been given.

Incidentally, the European Broadcaster Exchange (EBX—a joint venture of broadcasters including Channel 4 and Germany's ProSiebenSat.1 to unite their online and digital platforms for programmatic media buys—has yet to launch, despite being scheduled to do so early in 2018.

In the first half of 2018, EBX said it "invested heavily in a first-of-its-kind tech stack with a unique remit to aggregate and streamline the supply of advanced TV formats across multiple European broadcasters, resulting in greater media buying efficiency.".

Impact of GDPR

Distrust in the scraping of personal data came to its (possible) zenith with the furore over Cambridge Analytica's secret gathering of 87 million Facebook users' data. The introduction of the General Data Protection Regulation (GDPR) just two months after the Analytica story broke should stem such breaches in future, with the strengthened privacy practices believed to shore up the digital ship. 

The new legislation means users have to give explicit consent for personal identifiable information to be processed. This is particularly relevant within the digital sphere when working with such data as a device ID, a cookie ID, or an IP address.

The deadline for GDPR in May impacted data-driven activations in the first half of 2018, reckons IAB Europe, making key market players cautious. 

"Uncertainty associated with GDPR impacted advertiser confidence in most markets, causing slower growth in digital ad spend between March and June," commented Daniel Knapp, Executive Director TMT at IHS Markit. 

The overall impact, though, has been positive in building trust in the industry. "GDPR doesn't prevent the collection of audience behaviour data, but does ensure that consumers are fully aware of what data is being captured and how it is being used," says Aditya Ganjam, chief product officer at Conviva. "Ultimately this will help weed out bad actors and should prove beneficial to the industry."

Ecommerce Spends Big on TV

UK TV ad revenue declined in 2017 for the first time in seven years, according to figures from Thinkbox. Revenue totalled £5.11 billion ($7.07 billion), down 3.2 percent on the record high set in 2016, although the commercial broadcasters trade body expected sales to bounce back by end of 2018.

It attributed the decrease to "ongoing economic and political uncertainty with a weakened pound and inflationary pressure leading some advertisers to reduce TV investment;" i.e., Brexit. Perhaps unsurprisingly given its cold shoulder to online, P&G was the most viewed advertiser on UK TV in 2017 with 33.5 billion views. Thinkbox was also at pains to point out that e-commerce brands such as Amazon, Netflix, and Expedia are spending heavily on TV for reach and influence.

According to figures compiled by The Global TV Group, a grouping of broadcasters' and sales houses' trade bodies in Europe, the U.S., and Australia, Airbnb'sTV ad spend in Germany increased by 44% between 2015-17; Amazon's TV ad spend in Spain went up 100 times in three years to reach over €11 million ($12.4 million); Brands such as Trivago and Google invested £682 million ($868 million) in TV advertising in 2017, up from £590 million ($751 milliion) in 2015.

SVOD Overtakes Pay TV 

Global SVOD revenues topped $35.04 billion in 2018, an increase of more than 40% since 2017's $24.87 billion and 214% since the $11.16 billion in SVOD revenue during 2015, finds Digital TV Research. While the biggest gains came in China, the researcher suggests Germany has the third-highest revenue climb since 2015 at 248%, a total of $1.038 billion, up from $298m in 2015. However, Germany's SVOD revenues are exceeded by Japan ($1.093 billion, up 43%) and the UK ($1.758 billion, up 186%).

Such figures are correlated by latest research from the Nagra/MTM developed Pay-TV Innovation Forum (registration required). In the UK, for example, the total number of subscriptions to the UK's three most popular online streaming services—Netflix, Amazon Prime and Sky's NOW TV—reached 15.4 million in Q1 2018, exceeding for the first time the number of pay TV subscriptions, at 15.1 million.

Nagra/MTM notes, however, that UK pay TV subscription revenues—£6.4 billion ($8.1 billion) in 2017—continue to dwarf subscriptions revenues from OTT services, which reached £895 million ($1,139 billion) in 2017 (figures taken from its most recent research).

Nor is SVOD revenue growth likely to slow. DTV reckons it will chart above 40% for several years to come, not least a result of the arrival of 5G mobile services and the continued trend toward adoption of multiple OTT services. 

Juniper research found that UK consumers acquire an average of 2.5 subscriptions each. Other research from Nagra/MTM states the number of UK households with at least one SVOD subscription as 11.1m.

An Ampere survey of Q3 2018 found that Germany, Spain, and the UK now have more SVOD-only homes than pay TV-only homes (joining countries which already hit this mark like the U.S., Australia, Sweden and Italy) while France, Poland, Turkey and the Netherlands have yet to make the transition. 

This comes at a time when more and more SVOD services are launching, not least from broadcasters and content producers attempting to go direct to consumer.

As Ooyala's global sales development manager David Gordillo observes, if all new services go SVOD OTT, viewers can't subscribe to them all. 

"That creates a really high barrier to entry for start-ups and traditional broadcasters who want to go DTC with a subscription model. If the OTT bill starts to look as fat as the cable TV bill, with thousands of channels that viewers will never watch, this opens the door for a disruption to the OTT market, similar to what we saw happening with Netflix and traditional TV."

As the new "post-OTT" pay TV landscape becomes increasingly fragmented, many industry executives expect to see a second wave of content re-aggregation. According to the Pay-TV Innovation Forum, this model—where companies offer a range of pay TV and OTT content and services via a single subscription—is seen as a way of simplifying a fragmented marketplace for consumers, while also offering additional growth opportunities for some of the well-established telcos and pay TV platforms. 

"The lines between pay TV and OTT are blurring," states Nagra/MTM. "Most traditional pay TV providers are now looking to offer converged pay TV/OTT services to their customers, as service providers move towards a platform-agnostic model. As a result, the pay TV market is transitioning into a paid-for-video market."

In many markets, pay TV providers are moving beyond core content services delivered via the set-top box. "Many industry executives believe that network infrastructure and billing relationships – rather than proprietary set-top boxes – are now the gateway to the customer," it states.

The astonishing near monopoly on pay TV middleware made by Google's Android TV in the last 18 months fits this trend. Android TV (operator tier) offers all but the largest pay TV providers (like Comcast, which remains wedded to its huge investment in RDK) a cost-effective and rapid on-ramp to adding OTT (notably YouTube and Netflix) with inbuilt voice control. In theory all that's needed is a customised UI to differentiate each operator.

Churn Levels Unsustainable

There's also a considerable risk of churn. Parks Associates research suggests up to 30% of OTT subscribing households have cancelled one or more services within the past year.

Ampere projects that even Netflix (which does not publish churn rates) is estimated to churn between 20-25% of its subscribers (in the U.S.) over a six-month period, according an article in Advanced Television

By comparison, most successful pay TV operators with very satisfied customer bases much lower churn rates, with various reports showing numbers from below 2% to as high as 12%. SVOD's typical one-month rolling contracts mean that there are fewer barriers to churning and re-subscribing. 

"In an increasingly crowded and competitive marketplace where subscriber acquisition costs are already high and soaring, the 20-30% average is an unsustainable level of churn," says Dime Serafimov, demand generation manager at Cleeng.

Cleeng's prescription is a better gathering and analysis of subscriber to be able to proactively nip potential app-cutters in the bud.

"The simple truth is that churn rate optimization—reducing the number of customers who abandon your product or service—is more essential to SVOD profitability and long-term success than conversion rate optimization," he says.

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