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Deep Dive

Can Australia's TV networks unite to ride the AVOD avalanche, or will Netflix bury them all?

By Paul McIntyre - Executive Editor

2 March 2020

By Paul McIntyre - Executive Editor

2 March 2020

Linear TV’s audience decline is faster and deeper than anticipated. Yet Australia’s commercial free to air networks could be a major streaming force – and the biggest ad-funded game in town - if they were to collaborate. If they don’t, then the future of TV looks bleak, according to Justin Lebbon, Christian Kurz and Guy Bisson. They think the death of TV would be incredibly bad news for brand marketers and agencies tasked with delivering growth.

There's a lot more in the podcast. If you're interested in the future of TV, streaming, brand building, advertising and audiences, listen here.

You need to know this:

  • Ebiquity’s Mind The Gap report states that by mid decade, linear TV will be well on the downside of the tipping point in erosion of linear audiences. Even the analysts admit they underestimated the pace.
  • By 2022, according to Ebiquity, an ad shown on linear TV will reach 60% fewer teens, 50% fewer 18-24 year-olds and a third less 25-44 year olds than it did in 2018
  • TV is trying to adapt on audience measurement and trading and improving viewer experience, but change remains too slow
  • In Australia, the combined streaming services of the FTA networks 7, 9, 10 plus SBS would make a number two competitor according to Ampere Analysis, with 34% of reach, behind only Netflix, which does not take ads
  • Marketers and agencies need ad-funded streaming services to grow brands, especially as linear TV declines
  • Growth of Hulu’s ad-funded model suggests consumers accept the trade-off – provided fewer, less disruptive ads
  • Analysts and market players suggest 2020 will be the year AVOD takes off


Shift happened

Ebiquity’s numbers make grim reading – and they are worrying marketers and agencies tasked with delivering growth.

As the report’s title suggests, linear audience declines leave a big gap.

Right now, broadcasters’ streaming services are nowhere near big enough to fill it.

“Free to air TV is about to get a massive shake up. Accepting that change, rather than running from it, is where the answer lies.”

- Guy Bisson, research director, Ampere Analysis

Stop worrying and learn to love the VOD

Broadcasters are belatedly realising the need to collaborate, but they need to move closer together, faster, according to Justin Lebbon, co-founder and director at Mediatel Events, which puts on the Future TV Advertising Forum in London, Sydney and Toronto.

“There’s lots of intent to do something, but in my view there is not enough action. Broadcasters should have acted way earlier as a step forward, an aggressive play,” says Lebbon. “Obviously it didn’t play out like that. Now they are acting defensively and that’s just the situation we are in.”

Guy Bisson, research director at specialist TV research firm, Ampere Analysis, agrees. He thinks the broadcasters are becoming “more realistic” about the situation they are undeniably in. Now he says they must stop being afraid and embrace the future - if they are to be part of it.

“Free to air TV is about to get a massive shake up. Accepting that change, rather than running from it, is where the answer lies.”

“Once we have strong ad-supported aggregated streaming alternatives to linear TV, then, the opportunity is there to get a similar impact.”

- Guy Bisson, Ampere Analysis

Collaborate and everybody wins

Bisson thinks if broadcasters can put together a combined play, with quality ad-supported content in one place, they could offer marketers an alternative.

Locally, he told the Future TV Advertising Forum in Sydney last week that the combined streaming services of Australia’s FTA networks would make the second biggest streaming service in Australia, with 34% reach.

“Once we have strong ad-supported aggregated streaming alternatives to linear TV, then, the opportunity is there to get a similar impact. It’s just that we’re at the very cusp of the complete revolution of free-to-air, ad supported streaming that we’ve already been through in the subscription-streaming environment.  That’s the next step that we’re on the cusp of,” says Bisson.

“When we start to progress down that road, I do think it will become slightly less scary. It’s about embracing that opportunity and monetising it correctly and capturing that audience back.

Bisson points to Hulu’s ad-funded model as a pathfinder, which is reportedly making the company more money per subscriber than its ad-free service.


Turn on, tune in, drop out?

While linear TV audiences are declining, people just want good shows, regardless of delivery mechanism, argues Christian Kurz, senior vice-president global consumer insights at ViacomCBS.  

Asked to define TV, audience surveys around the world throw back the same answer: “It’s the shows and the movies I watch, it doesn’t matter what platform it’s in,” says Kurz. “So that really gives me hope, because as a content company, we’re storytellers.”

However, he thinks that there is a chance that the plethora of streaming services now coming to market risk not just greater fragmentation, but turning consumers off.

“People want TV to be easier than it is,” he says. “It is getting really complicated now and there has to be some simplification again.” Hence, adds Kurz, TV companies around the world are “trying to build all this stuff back into their ecosystem one way or another.”

Meanwhile, a unified interface, the podcast panel agrees, recreates the “lean back” TV experience.

“I think [the TV networks] are better off working together. They’re better off making TV more efficient to buy and to trade. Unified buying across all of these platforms would be a good idea.”

- Justin Lebbon, co-founder and director, Mediatel Events

An avalanche of AVOD

Analysts like Bisson suggest 2020 will be ‘the year of ad-funded video on demand’ – and Justin Lebbon agrees, on the basis of economics if nothing else.

“The SVOD platforms out there are privately funded by and large.  We can’t figure out whether they make any money and we’re pretty damn sure that they don’t,” he says. “Lots of people are talking about 2020 being the year of AVOD, because we need advertising to fund content.  It’s the only way it works and we’re going to see a lot more of [it].”

He thinks the TV companies should therefore collaborate on back ends as well as front ends.

“I think they’re better off working together.  They’re better off making TV more efficient to buy and to trade.  Unified buying across all of these platforms would be a good idea. Very difficult to execute but it’s something that they should do,” says Lebbon.   

“A lot of brands complain that it’s difficult to buy TV, to buy the audiences.  It’s expensive.  Production costs are high. You have to produce so many different ads for so many different formats and platforms to get the same amount of eyeballs that you could have got five years ago and TV hasn’t changed.  They need to become more digital-like in the way that they trade and the metrics that they offer and the measurement that they support clients with.  So there’s all those changes need to come in.  Whether they will happen or not … who knows?

“As long as I think of myself as a broadcast company, I’m never going to get to that point. If I think of myself as a company that makes great shows that I have to get to people and fund somehow, then you absolutely can get there.”

- Christian Kurz, senior vice-president, global consumer insights, Viacom

Groundhog day?

A decade ago the Australian broadcast industry had the opportunity to work jointly with Hulu as it began to emerge out of the US. It didn’t happen. So why would anyone think the local leopards can change their spots?

Guy Bisson thinks it’s simply a case of timing. Or more accurately, that time is now up. “I think we’re getting to a point where … you have to or someone else will and they will take that business,” he suggests.

Viacom’s Kurz says survival requires a mindset shift.

“It comes down to how the players understand themselves. As long as I think of myself as a broadcast company, I’m never going to get to that point.  If I start transitioning and think of myself as a company that makes great shows that I have to get to people and fund somehow, then you absolutely can get there.


Ad loads and integration

But TV won’t “get there” without addressing ad loads. Ads themselves are not the problem, says Kurz, pointing to Hulu’s ad-funded subscription service as evidence.

“From a consumer perspective, there’s starting to be an acknowledgement that ads are actually there for a reason,” he says. “When a consumer has an option of paying X, or paying slightly less than X but they get to watch a couple of ads, people are going to go there, because we’re now attributing value to watching those ads. They are willing to accept that, but it has to be a fair trade.”

Guy Bisson says it is “absolutely essential” TV addresses its ad load problem, but believes the shift to AVOD presents a “fantastic opportunity”. He also thinks it enables exploration of hybrid models: “fewer ads and pay a bit, or you can have a couple more ads and pay nothing, which is what NBC Universal, for example, is planning to do with its new streaming service,” says Bisson.

Kurz says networks and brands should also take the opportunity to think beyond spots and more around integration, “because that’s the only way you get into a now ad-free on demand environment as well”.


Takeout: Turn and face the strange

If nothing else, what are key takeouts for broadcasters hoping to ride the AVOD avalanche?

“Embrace change, leverage strength,” says Bisson.

“It’s about content” offers Kurz. “We’re storytellers so we have to figure out what stories do we want to tell, to whom and how. ” Equally critical, he says, is much greater collaboration. “I think everything that’s going on around ThinkTV and all of those things are great initiatives - but there’s got to be more.”

Justin Lebbon thinks the metrics and mechanics are key aspects.

“[It’s all around] trading and measurement.  By measurement, I mean proving the value of your medium in a performance outcomes-based context,” he says.

By trading, he means, “changing entirely the way that we trade.  We’re going to understand that an impression is not the same across all the different platforms and we’re going to value it accordingly.”

Simple enough to say, but has the buy-side grasped that and do they want to go through that kind of change?

“The smart ones do.”

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