In this new age of “cord-cutting” and “time shifting,” broadcasters are grappling with the challenge of advertisers moving their ad spends to less traditional digital environments. But Despite Netflix CEO Reed Hastings recent prediction that linear TV would be extinct 20 years from now, dont for a moment think that broadcasters are doomed to be an endangered species.
Although broadcasters face fierce competitive challenges from Over-the-Top (OTT) providers, embracing advanced technologies and innovative business models can potentially strengthen their market position -- and improve their access to precious ad dollars.
Bottom line: broadcasters must seek out new ways to generate and monetize compelling content that delivers value to the end consumer. They also can collaborate on OTT strategies with other players and optimize their live news and sports programming.
For all the talk about the disruptive impact OTT video services are having on delivering entertainment experiences, broadcasters still got game. At the National Association of Broadcasters (NAB) conference in April, the groups President and CEO Gordon Smith pointed out that while consumers will continue to explore different platforms for sources of information, broadcasting will still deliver value to viewers -- particularly as the industry embraces next generation platforms.
A recent study by Viacom confirmed that linear TV is not dead -- despite the dramatic growth in online streaming, 69 percent of adults and 76 percent of children cited linear TV as the starting point for their content viewing journey. Linear TV is the only source, currently, that satisfies both passive and active viewing needs, the study said.
"In an increasingly fragmented marketplace, next gen promises to provide flexibility, IP interoperability and new revenue streams; opportunities to innovate to better serve our communities; and the ability to compete in a mobile world," Smith said.
"By going to next gen, broadcasting would be playing both defense and offense. Defensively, we would protect our ability to easily integrate with existing partners. Offensively, it would give us the flexibility to choose and pursue the promise of ultra HD, targeted advertising, datacasting, mobility and enhanced multicasting on a shared channel."
Advertising is an important driver for these strategies. According to a new study from FTI Consulting, core online advertising will climb from $37.5 billion in 2014 to $41.8 billion this year and $55.6 billion by 2018. The estimated annual growth rate of 10.3 percent for digital ad spending forecast by FTIs Media & Entertainment team stands in sharp contrast to a projected 4.2 percent average annual increase for the broadcast sector over the same five-year period.
Broadcast ad revenues are expected to rise minimally in 2015 to $38.9 billion and to $45.5 billion by 2018.
"While it is difficult to completely isolate one factor that is driving changes in ad spending from the historical trends, our model suggests that digital substitution is the primary driver contributing to changes in the television ad ecosystem today," said Philip Schuman, Senior Managing Director and Co-Leader of FTI Consultings Media & Entertainment team.
"We believe that effective data-driven targeting, low CPMs and vast inventory, as well as a direct feedback loop that enables advertisers to calculate a return on digital advertising dollars spent, has enabled them to allocate less to get more."
Collaboration will play an increasingly important role as well. On the heels of Apples new News app announcement, five major broadcast television station groups formed NewsON, a new venture to provide live and same-day local TV newscasts with on demand content from leading stations around the country to consumers mobile and selected connected TV devices.
The service will be provided by a new venture formed by The ABC Owned Television Station Group, Cox Media Group, Hearst Television, Media General and Raycom Media. The free, advertising-supported NewsON service will be delivered through apps available for download from leading mobile and connected TV app stores. The NewsON service, which will launch this fall, will enable viewers to watch live and on-demand newscasts from their local markets or from any of the 112 participating news stations, in 84 viewing markets across the U.S.