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Signal [18.09]: CTV platforms are coming for BVOD cash, NFL delivering the same for more, platforms embrace MMM
Ben Shepherd
Signal: the media and marketing analysis newsletter.Momentum: the strategy system.Consulting: to organisations seeking commercially effective outcomes.
Hello, this is your weekly SIGNAL [18.09]??
This week: Amazon wants a 30% cut of BVOD ad revenue in AU, NFL ratings deliver the same audience for more money for broadcasters, and what’s with the mega platforms sudden embrace of media mix modelling?
What’s new:?Amazon has told Australian TV networks that it will demand 30% of advertising revenue for advertisements that run via their apps that run on Amazon’s FireTV platform. Amazon appears to be the first platform level provider that has told the local networks that they either provide this level of platform fee or they leave their platform. This is a big deal as if Apple, Google, Roku and the other operators follow suit – it could see a dramatic shift to the BVOD landscape. If all platforms did this, it could amount to $150m in platform fees if enacted across the board.
Why it matters: In the US this level of platform cost is standard practice. And it’s a material revenue stream for the connected TV platform operators. It also brings connected TV in line with the rest of the internet and app economy where brands are generally taxed for search engine visibility, or taxed for transactions on apps. The real surprise is that it’s taken this long in Australia. It also shows that as core product revenue growth slows, platforms like Google and Amazon have to be more aggressive in monetising in areas they have overt leverage. It also demonstrates for networks that in the past they used to pay transmission fees to the government for access to spectrum, and in the future they will ultimately pay technology companies for access to platforms. That is, unless the media can turn to the government to ask for them to legislate to protect them.
Client implication:?As this is all predicated around advertising revenue, this has the potential to create significant complications for advertisers. If networks are mandated to pay this 30% platform tax, it’s likely they will seek to pass this onto the advertisers. So at worst BVOD ad rates could rise 30%. There’s also the complication of these platforms being both access provider and direct competitor to the TV networks. An example of the complication is if there’s a 30% platform cost applied, and TV networks are forced to increase the price of BVOD ads by 30%, this may make video inventory sold and owned by platforms such as Google and Amazon (via YouTube, Twitch, Prime Video) more appealing to advertisers and make BVOD providers even less competitive. It’s a thorny issue and one that demonstrates that the Internet is one of the most heavily taxed mediums we have ever seen in terms of its appetite to extract marketer money for access.
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What’s new:?Week 1 of the NFL has held the line ratings wise on 2022, demonstrating that the public appetite for what is ultimately the largest TV property in the world remains robust. However, the new rights deal that kicked in for 2023 and beyond (for 11 years), at $110b was priced at double the prior deal. So the reality is here is the NFL is delivering the same audience tonnage at twice the price.
Why it matters: Live sport is a critical part of any linear network remaining competitive, but that requirement has meant that for tier 1 sporting leagues the amount they can extract in terms of increased revenue is not commensurate with the audience increases they can generate. Live sport is at best holding its audience, and more realistically is reducing its audience at a low level, but the cost of access is increasing at levels not before seen. The price increase for the NFL broadcast partners is around 5-5.5 billion dollars a year for what is generating similar audiences to the year prior. A higher cost base needs to be covered by someone – and for live sport the entities bearing the brunt are consumers (i.e. subscribers) and marketers (via advertising revenue).
Client implication:?Higher ad prices. It’s that simple. And for consumers it will mean higher access prices (which impacts discretionary spend). Up to this point we haven’t really seen the line where sports advertising costs start to eclipse the perceived market value from advertisers, but the cost increases that are now impacting the NFL, AFL, NRL, Cricket (and will soon impact the NBA) will mean at some point the cost of access becomes too much for some.
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What’s new:?As cookie and browser based user signals have weakened over time, the large advertising platforms such as Meta, Google and Amazon have embraced media mix modelling with more vigour than in the decades prior as a way of proving their efficacy to clients. But is it that simple? And does the weakness of signals being transmitted from devices mean these businesses need other forms of data inputs to fuel their systems and targeting – and MMM provides them with a new trove of free data to monetise
Why it matters: Media mix modelling is not a new thing. As a statistical treatment it’s been used for decades. Ad agencies were early adoptors of MMM, but many advertisers started to think their agencies weren’t the right people to measure the efficacy of their own performance, and specialist MMM and analytics businesses sprung up which provided the notion of independence and distance from executional decisions. This division makes sense, but what doesn’t make sense is using one of your largest advertising beneficiaries to rate the performance of your entire media mix. What makes less sense to me is giving these platforms all your data on ad spends, tactics, sales etc. This is what makes the statistical embrace by the platforms such an odd move in terms of the lack of scrutiny, especially as their entire business model is hoovering up data, packaging it, and generally selling it back to you and other advertisers at a premium which makes them amongst the most profitable businesses in history. Providing granular data on ad spend, weights, network preferences, audiences, geographies, pricing, store level sales etc to platforms which sell audiences to you and all your competitors seems like questionable business.
Client implication:?Media mix modelling can be a good indicator of performance for some advertisers if they have the requisite level of data and perspective to make it functional and practical. But given the stakes at play it makes total sense to use an independent specialist in this area who has no other use for the data than to 100% measure the efficacy of your media investment. Not one that operates an ad platform. Not one that’s entire business is predicated on consumer data collection and packaging. The platforms are right to be embracing the potential for MMM to help with marketing decisions, but it’s a bridge too far to also want to control the systems and approaches (and models) that inform these.