All Roads Lead to Advertising

We’re finally seeing the consolidation in television that many always said would come, but it’s not as simple as consolidation of media empires. There’s more to it than that. And over the next 3-5 years, I expect we’ll only see it happen more frequently and with higher stakes. Jeff Eaker 's recent post highlights today’s dysfunction from a consumer point of view, but I think there’s a light at the end of the tunnel.

Here are three themes that might foretell a return to past norms:

Content is king, but it needs tax dollars from advertising to stay in power

Carriage fees gave rise to predictable revenue to fund ad-supported programming. Then came streaming (Netflix), with a distinctly new subscription - albeit without ads. But cutting the TV cord meant a premium on bandwidth, and usually a loss of local channels. This worked for a time. With cable no longer the sole gatekeeper to content, great content attracted audiences and forced media companies and advertisers to rethink their strategy amidst significant fragmentation. Competition led to increases in the cost of securing rights and producing content. By my count, there’s less than 10 major companies distributing the lion’s share of the best content on TV (Netflix, Disney, Hulu, Amazon, Warner Bros Discovery, Comcast, Fox, Apple). I’m leaving YouTube of out of this, but I’ll come back to this later - maybe. In the end, that’s still a lot of competition and that means advertising. For a while there was a belief you couldn't put the ad-free genie back in the bottle, but if there’s any evidence to contrary, it’s Amazon going from $0 to $1.8B overnight with commitments from the upfronts.

Consumers don’t care about streaming sticks, just like they never cared about their cable box

Roku was first, and The Trade Desk most certainly won’t be the last. The OS (or dare I say, middleware) that sits between the TV and the viewer takes on new meaning when there no longer needs to be a connection between the provider of the pipes and the provider of the content. But someone has to make those devices and/or the software that runs on TV’s natively. And to me, there’s no better return on that investment than mirroring the same concept of ad splits we see on linear TV. I have no doubt the data TTD will have from Ventura will be valuable. And with Walmart’s acquisition of Vizio it doesn’t seem far off to imagine that anyone who buys a Vizio TV - at least from Walmart - will be even more valuable. But why just sell or enrich something with data, when you can actually own a chunk of it?? And here’s where I think things get interesting. We might not be too far away from any sizable retailer being able to install their own version of an OS on every TV they sell. Somewhere along the lines the split in ad sales inventory between TV manufacturer, retailer, and content distributor needs to get worked out. But I think that’s actually quite easy when you consider how much more effective Retail Media has been than anything we’ve seen from TV manufacturers directly. Either way, we need more competition in this space.

Sleeping giants are waking up behind the scenes

In the Netflix’s cartoon series Hilda, there are these giants that are essentially creatures that have been on the Earth for thousands of years and make up the actual landscape. You can’t really see them or know they’re even there, unless one wakes up and starts to move (bear with me). I equate these giants to only a small handful of companies in the media space that play a fundamental role in the entire supply chain of television advertising. For the past two decades these providers have been waiting for the world to wake up to what they do for linear (and traditional VOD), and apply it to digital. I consider MediaOcean to be one of the most prominent. And if their acquisitions of both Flashtalking and Innovid weren’t a sign, the investments from Interpublic, Omnicom, and WPP are a strong indicator that the tectonic plates of advertising are moving and TV as we know it today - in all of it’s messy, cluttered, non-frequency capped forms - will be changing for the better. Nielsen, meanwhile, isn’t giving up the fight for it’s dominance and most recently signaled it’s still moving ahead to update it’s methodology to support Amazon’s first-party data for Thursday Night Football.

I’m sure there’s a lot of places where these ideas fall flat or don’t make sense. And how YouTube feeds into all of this is questionable. But overall, I think the competition and innovation directed at CTV is more likely to bring us back to our roots in the traditional television business model. Whereas podcasts seems to have taken the reigns over from AM radio, and Spotify has moved us away from physical media, I hope one day we can stop referring to extraneous TV-related acronyms and just go back to 'television.'

For agencies, it means renewed focus on fundamentals of creativity and media. For networks and distributors, it's about quality programming and brand recognition (hence Comcast’s cable spin out). For advertisers, it means the final form of video convergence and all the good that brings with it in terms of targeting, measurement, and effectiveness. For consumers, it just might mean fewer subscriptions, easier discovery of higher quality content, and an overall better lean back experience. In 2015, Tim Cook declared "the future of TV is apps." Technically, he's been right so far. Conceptually, I sure hope he's proven wrong.