March 18, 2020
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The State of Video Monetisation 2020

Germany's RTL Group sells inventory for its properties and represents partners, including RAI, DPG Media (formerly Medialaan) in Belgium, and ITV internationally through RTL AdConnect, which owns ad-techs SpotX and Smartclip. In the summer, it expanded operations in North America by opening a branch in Los Angeles to go with its East Coast office.

Stephane Coruble, CEO of RTL AdConnect, laid out the rationale: "Europe, as a fragmented market, can be difficult to enter and it is tempting to go to the online giants to build global campaigns. We leverage our position as RTL Group's 'total video' sales house to offer unique one-stop solutions for high quality content and brand safe environments, providing access to millions of consumers daily through Europe's leading online video platforms and high reach broadcast channels."

Total Viewing Measurement Advances

Subscription video-on-demand (SVOD) viewing on the TV set continues to march upward, taking up 19% of total activity in 2018, according to the ratings agency Broadcasters Audience Research Board (BARB).

It's been a source of heated debate that the main SVOD services, including Netflix and Amazon, have refused to share their data with the measurement service, forcing it to make a best guess about changing habits and trends.

That might change if CEO Reed Hastings is taken at his word. At a Royal Television Society event in September, the Netflix boss admitted that SVODs had been "guilty of being simplistic" over data and rights and said he would be happy for Netflix to be measured by BARB in line with UK broadcasters. "The best solution is to have BARB report on us in a consistent way," he said. "No one wants to rely on us to do our own measurement. To a strong degree, it would be good for us and the industry to be on the BARB panel."

BARB commissioned Kantar to install its broadband router meter technology into the panel of 5,300 BARB homes to track streaming activity by any member of the household on any device. This will provide greater insight into unidentified viewing (TV set viewing that BARB cannot identify, which accounted for 20% of total TV set use in 2018). A significant portion of unidentified viewing is believed to comprise viewing to SVOD and online video services.

The meters will track video streaming activity from a designated list of BVOD, SVOD, and online video services, including Amazon, Netflix, and YouTube.

"Whether it is live streaming or watching on-demand, people around the UK are getting used to watching content that's been distributed through BVOD services and other online platforms," said BARB chief executive Justin Sampson in a press release. "This is why a meter attached to the broadband router in panel homes is a vital capability for BARB to have."

The data will be reported at an aggregate, rather than programme level, with hopes it will start to become available toward the end of 2020.

AVOD Gold Rush

While the streaming market has been driven by subscription, ad-supported streaming services came to the fore in 2019, as did hybrid models that combine both subscription and advertising.

Advertising-supported video-on-demand (AVOD) platforms are not directly competing with the large SVODs, suggests Ampere analyst Isaq Chowdhury in a blog post. Instead, they present an alternative option for consumers who are seeking more content at a lower cost.

According to Ampere, the more SVOD services a household takes, the more likely viewers are to be tolerant of advertising. This is most likely among younger consumers, who have a higher tolerance for advertising. Plus, as consumers reach online video spending limits, they may be more willing to watch ads as a trade-off for a service that is cheaper or even free.

AVOD revenue growth is expected to increase dramatically over the next few years as viewers switch to OTT and ad dollars move accordingly. Initiatives in this area include broadcaster portals like ITV Hub, where inventory is being sold programmatically. Netflix's recent overtures about joining BARB perhaps signal its intent to launch an ad-supported tier, following in the footsteps of Amazon's Internet Movie Database (IMDb)-affiliated Freedive. Viacom's AVOD Pluto TV was made available on Apple TV and mobiles in the UK, Germany, and Austria in 2019 and also debuted in Switzerland.

Netflix and other premium SVODs would need to tread wisely in the UK. Almost three-quarters of UK TV subscribers voted against sponsorship or ads on VOD services in a survey by consultancy Differentology. A fourth of people would upgrade to an ad-free service, and 39% would either cancel their subscription or switch to another paid service.

In the US, Facebook and YouTube are expected to continue leading the market through 2023, trailed by Hulu, Roku, and Tubi, according to an end-of-year report from IHS Markit | Technology. "The AVOD goldrush is here, and it represents a prime opportunity for service providers, new AVOD entrants, and content companies," writes Sarah Henschel, senior research analyst for media. "Ultimately, the winners and losers in the AVOD industry will be determined not only by content, but also by data strategies and user acquisition."

The degree of product placement in original content used by SVODs to supplement revenue came to light in a survey by Branded Entertainment Networks. All of Amazon's original programming contains brand integrations; 91% of Hulu and 74% of Netflix originals do. For example, Netflix worked with Coca-Cola to weave a new drink into the core plot of Stranger Things season three.

Monetisation Strategies

"Overwhelmed consumers will become more discerning and focus their time on services with algorithms that provide the greatest enjoyment," says Kantar in its Media Trends report. "Among subscription-funded services, the winners will be those with the highest quality original content and understanding of different audiences."

Yet having great and exclusive content is no longer enough to keep customers truly entertained and engaged. There was a heightened realisation this year of the importance of the user experience in attracting and retaining viewers.

The UI should get users where they want to go in the least number of clicks. It's the Netflix model to which others are still playing catch-up. Vodafone Portugal updated its UI in July, describing the change as "simpler, intuitive and intelligent," and including the basic ability to resume viewing at the point when it was interrupted. A summer update to Sky Q included
"simple, one-touch destinations" for functions that help customers "find what they want to watch quickly and easily on any device."

QoE is another vital part of the equation. A Brightcove survey found that too many ads and poor video quality are the key spoilers for live-streaming experiences, with respondents also abandoning a live stream because of buffering and the live stream crashing.

Ad delays of just 5 seconds lead 13.6% of viewers to abandon content, a report by Conviva has found. With nearly half of all streaming ads failing (per Conviva), that's a big risk for service providers as more ad dollars head for the streaming world.

SVODs should focus as much effort on retention as acquiring subscribers in the first place. "A significant rise in acquisition costs (the marketing cost of fresh subscribers for Netflix US alone is around $100), coupled with the pressure to encourage viewer loyalty beyond a handful of months, means that subscriber retention [is] a far more economically feasible growth option for today's OTT players," Cleeng strategist Dimitar Serafimov argues in a blog post.

The fragmentation of content options is expected to exacerbate viewer fatigue as well as max out their wallets, leaving the field open for platforms best able to aggregate multiple accounts and to deliver an array of targeted content and services like contextuality, second screen, and voice control. This puts content discovery at the top of the list for service providers.

Vodafone Portugal, for example, introduced a voice-driven search engine to its UI that uses natural language recognition. The next stage of sophistication will likely include tools to discern the viewer's emotional state to refine content recommendations.

Even if machine learning is used to drive personal content recommendations, the sheer scale of available content and datapoints renders traditional grid or tree-based UIs unfit for purpose going forward.

The advent of 5G is expected to boost video advertising, particularly over mobile. Faster speeds and high-resolution ads might encourage viewers to stop scrolling and watch more ads. There will be opportunities to create personalised video ad storylines to push up engagement rates, and creatives could exploit the potential of AR games to get people to interact with brands.