The Ad-Supported Video Industry: A Consumer Evolution, Not a Revolution - Brian Wieser

Originally published 4272011Many observers of the media industry citing ongoing changes in consumer behaviors for example cord cutting or commercial skipping say these changes will impact the business of video advertising in general and linear TV advertising more specificallyWhile it is intuitively appealing to begin by analyzing changes in consumer habits I contend that evolution is far more likely than revolution in years aheadLet39s break down the industry into some underlying components collectively referred to as its Value ChainThe revenue models for each of these components have been well established for years Content creators such as actors and writers tend to sell their workperformance rights to producers Individual producers of television content generally find it most profitable to sell content to packagers such as TV networks who buy from multiple producers some of who they directly control Packagers39 business models often feature revenue streams from advertisers as well as distributors Distributors of television content who have the direct relationship into a consumer39s home come in a variety of forms and usually with a range of bundled services alongside video many distributors can resell the same packaging What we are calling quotdisplayquot is even more diverse but conventionally involves a device which receives content such as a settop box and another one which renders it on a screen such as a television setHow will each of these components evolve While the creation function remains mostly constant other than perhaps the increased use of computergenerated content others are more subject to potential changeFor example producers will refine their concepts of quotwindowsquot exclusive rights to different packagers at different points in time to maximize profits The dominant windows will be those which capture the bulk of revenue faster than any others For the most part on television this will likely be the conventional firstrun broadcast or cable window as long as the majority of the population accesses content as they do todaySimilarly seeking to maximize revenues packagers will continue to seek higher distribution fees as long as they can be passed along to consumers Concurrently packagers will continue to seek advertising budgets as long as packages of their inventory uniquely satisfy objectives of advertisers which television does because of its reachfrequency dominance By contrast for the present time and foreseeable future packagers who are primarily based online are limited in their scale amp8211 and thus their sustainable clout with producers amp8211 because of the bottlenecks in distribution capacity of content through the quotlast milequot to the homeCapacity bottlenecks will require billions of dollars and years of innovation to overcome depending on the efforts of distributors to invest in delivering more bandwidth However competitive incentives to offer significantly more bandwidth at low prices are limited as the required investments are high and unlikely to be undertaken by additional players on a widespread basisBy contrast display devices benefit from a sustained innovation by virtue of the fact that there are many manufacturers of video display equipment With new means for authenticating subscribers a la quotTV Everywherequot consumers will have the option to consume content on a wider range of devices But scalable change is also limited One reason is that the life cycle of a television amp8211 from purchase to disposal amp8211 can exceed a decade and thus innovation can take time to become widespread within homesMore importantly typical consumers may not be seeking to change all that much much of television consumption is fundamentally passive As much as 45 occurs as a secondary activity according to the Council for Research Excellence And much of the rest of viewing is genrebased rather than programbased only a small subset of TV viewing is focused on specific programs A useful proxy to consider is the 20 of TV viewing which occurs on a DVR during prime time in homes with DVRs Arguably this is the segment of viewing which new forms of video consumption will likely compete against To point online video and video on demand consumption each currently equate to less than 2 of traditional viewing even though much of the best content is now available on these platformsThis comes down to why consumers watch TV it is an escape from daily activity which allows individuals to be passive and relaxed Contrary to many expectations this remains the form in which the consumer has expressed a desire for control Any other changes will require more fundamental changes in habits which can take extended periods of timeNone of this is to deny that change will occur Change will occur in the form of sustained improvements within individual components of the business Meanwhile we expect to see television evolving as the industry continuously takes a good product and makes it betterBrian Wieser is CMO of Simulmedia an audiencetargeted advertising network for linear television founded by veterans of companies including 247 Real Media and Tacoda He can be reached at briansimulmediacomRead all Brian39s MediaBizBloggers commentaries at SimulmediaCheck us out on Facebook at MediaBizBloggerscomFollow our Twitter updates MediaBizBloggerMediaBizBloggers is an openthought leadership blog platform for media marketing and advertising professionals companies and organizations To contribute contact Jackmediadvisorygroupcom The opinions expressed in MediaBizBloggerscom are not those of Media Advisory Group its employees or other MediaBizBloggerscom contributors Media Advisory Group accepts no responsibility for the views of MediaBizBloggers authors

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The Ad-Supported Video Industry: A Consumer Evolution, Not a Revolution - Brian Wieser

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The Ad-Supported Video Industry: A Consumer Evolution, Not a Revolution - Brian Wieser

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"About That with Carl Mayer": Involved Media Connected Audience Fall 2024 Report (Episode 5) - By Carl Mayer

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