OTT: What the Living Room Revolution Means for Brands

OTT: What the Living Room Revolution Means for Brands

September 19, 2014

© 2013 IPG Media Lab. Proprietary & Confidential 2

“How did you go bankrupt?” Bill asked.

“Two ways,” Mike said. “Gradually, then

suddenly.”

— Ernest Hemingway,

The Sun Also Rises


In 2013, for the first time since the advent of cable, there was a net loss of subscribers, while connected devices continue to grow.

We’ve hit “Peak Cable"


Over-the-Top (OTT) services and hardware circumvent the traditional framework of pay

TV services like cable and satellite by delivering content to the television over

broadband Internet:

•  Over-the-top platforms (e.g. Roku, Smart TVs) are expected to cause a small but

slowly growing cohort of cable/satellite TV subscribers to drop these services over

the next five years (in addition to Millennials coming of age having never subscribed

to traditional services in the first place, a la the decline of landlines).

•  The 2014 footprint of OTT devices in the US expected to be 47 million, up 100% over

last year.

Source: MAGNA GLOBAL’s Media Access Quarterly 2014

OTT is slowly but surely taking cable’s marketshare


OTT has infiltrated the average living room through smart TVs, Blu-Ray

players, set-top boxes, and gaming consoles:

•  Smart TV footprint in the US is expected to rise from 45 million today

to 78 million by 2018.

•  By the end of 2014, the footprint of connected game consoles (e.g.

PS3/4, Xbox 360/ONE) is expected to be 88 million homes.

Source: MAGNA GLOBAL’s Media Access Quarterly 2014

And it’s not just for tech-savvy geeks

An image from a consumer electronics retailer mailer; note that OTT

services such as Netflix and HuluPlus are clearly advertised


OTT is fundamentally challenging decades-old assumptions

•  Why are TV channels numbered? •  Why do viewers have to wait for the program they

want “to be on”? •  Why don’t we have precise targeting and analytics

for TV ads? •  Why is the call to action of most ads “remember

this now, buy later”?


And it’s no accident: both user interfaces are designed for consuming

concept in the digital age. On OTT platforms, the artificial construct of

numbering content and browsing for “what’s on” melts away: content is

always on; bundles give way to micro-subscriptions.

TV is starting to resemble the content model found on mobile devices


Business models are evolving

Currently, networks act as intermediaries between content and brands.

Adver'ser 2 tons of money Network A ton of money Content Owner


OTT delivers content directly to brands and consumers

New models will evolve out of users’ relationship with content rather than distribution channels.

Content Owners Ad Revenue Subscrip'on Fees Adver'ser Audience


The wide adoption of OTT viewing will force brands to reconsider everything from how

to buy airtime to how to achieve mass reach. Pre-, mid-, and post-rolls on videos will

continue to resemble the typical 30-second spot, but new tools will become available,

such as:

•  Branded content channels

•  Interactive, social shopping experiences

•  Display ads within the device UX

•  Sponsored interactive experiences with an overlay synced to other content

What now for brands?


Tools and workflow will feel like those used for the web:

•  Measurement will resemble web analytics much more than Nielson scores.

•  More ad inventory will be bought programmatically through mechanisms not unlike

those found on the web.

•  TV ads will be delivered in an addressable fashion, tailored for each household and

often bought in an RTB exchange.

Buying and measurement will be made for the digital world


OTT isn’t going to replace cable tomorrow, or even next year. But if you’re not paying

attention, one day soon you’ll suddenly find:

•  Brands will target home viewers based on cross-device behavior and

demographics, down to the individual household level

•  On-demand, a la carte programming is the norm

•  Consumers will interact with ads using their mobile phones

•  Social sharing endpoints will exist throughout entertainment programming,

branded or otherwise

Coming to a living room near you


The Lab has released an in-depth white paper on the OTT ecosystem and its implications for media

owners and brands, including:

•  An analysis on what is delaying changes in viewing behaviors

•  A sampling of innovative services and hardware that exemplify the potential for huge changes in

viewing behavior

•  Case studies of how marketers are already active in the space

•  How incumbent cable and satellite operators are reacting

•  A vision for new forms of content and ad inventory in the future

•  How this affects the move towards programmatic

Download the full paper here.

IPG Media Lab releasing a white paper on OTT


We hope you’ve found this POV insightful and provocative. If you have

questions, please contact us:

ipglab.com

[email protected]

212.883.4751

@ipglab

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