Daddy, What’s a TV? Advertising in the Digital Age

I am old enough to remember the pre-cable (and even pre-remote!) age. When cable TV started gaining in popularity and there was talk of TV content moving to a subscription model, some wondered what would happen with TV advertising.

Well, TV advertising remained strong and continued to grow. Cable didn’t take advertising away. Yes, it became a subscription of sorts – people do pay for TV access – but most perceive it as a way to get a good picture and lots of channels. The packages are so broad that no one knows the price they pay for a particular channel such as ESPN or HistoryHD.

Now, things are changing again. The potential for disruption is once again on the horizon. eMarketer is reporting that cable subscriptions may be declining as more and more consumers begin using over-the-top (OTT) content viewing. OTT is the newest term in the digital-meets-TV space so let me take a moment to explain.

Wikipedia (which can be amazingly up-to-date on things like this) says that OTT “describes broadband delivery of video and audio without a multiple system operator being involved in the control or distribution of the content itself.” Eh? Exactly! What this is referring to is accessing things like Hulu, Amazon, Netflix and YouTube to view programming that used to be only found on TV. According to eMarketer, the percentage of people watching OTT content daily is now 33% – double the rate from two years ago. And the percentage who do it at least weekly is now 59%.

What’s particularly interesting to me about this trend is that OTT is device agnostic. When you have a Netflix subscription, you can access the content from any device – TV, tablet or mobile. So, there is potential for devices to merge much more quickly than once thought. Today, I have apps for Netflix, YouTube and Amazon on three devices. Will all or a great percentage of content viewing via TV become app-based? Will the age of broad cable packages with hundreds of channels become a thing of the past, replaced by a la carte buying to be viewed device agnostically?

In this model, where will TV advertising sit? One possibility is that some of the video content will be bought via subscriptions to Netflix/Hulu and the like, and some will be ad-supported in the form of pre-roll and mid-roll video content much like how back episodes of shows like Survivor can be watched on PCs with one or two commercial breaks. Once again, the interesting thing to me is the device agnostic nature of this advertising. The ad “units” bought will be able to run on any device.

Another potential is that some of the device owners such as Microsoft (Xbox ONE recently unveiled) will be able to insert ads before content viewing for consumers who choose ad-supported versus subscription access to games and video content. Finally, the third option is that Google will simply take over all pre-roll video ad serving on all devices and leave crumbs for smaller players.

For years, there has been talk about the growth of digital pre-roll video advertising. The only thing standing in the way has been the relative lack of online video content. Where will it come from? How will more content get online? Perhaps it’s not a matter of video content such as movies and TV shows coming “online” but more a matter of “online” in the form of OTT viewing coming to TVs. A key message to brand managers and brand researchers: digital is coming fast and old models are breaking down. The best way to be prepared is to learn as much as you can about how digital advertising and pre-roll video is sold, bought and measured today – and as quickly as you can – so that you can be ready for the device agnostic future of content viewing and brand communications.