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
© 2013 IPG Media Lab. Proprietary & Confidential 3
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"
© 2013 IPG Media Lab. Proprietary & Confidential 4
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
© 2013 IPG Media Lab. Proprietary & Confidential 5
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
© 2013 IPG Media Lab. Proprietary & Confidential 6
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”?
© 2013 IPG Media Lab. Proprietary & Confidential 7
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
© 2013 IPG Media Lab. Proprietary & Confidential 8
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
© 2013 IPG Media Lab. Proprietary & Confidential 9
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
© 2013 IPG Media Lab. Proprietary & Confidential 10
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?
© 2013 IPG Media Lab. Proprietary & Confidential 11
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
© 2013 IPG Media Lab. Proprietary & Confidential 12
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
© 2013 IPG Media Lab. Proprietary & Confidential 13
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
© 2013 IPG Media Lab. Proprietary & Confidential 14
We hope you’ve found this POV insightful and provocative. If you have
questions, please contact us:
ipglab.com
212.883.4751
@ipglab
Thanks!