Streaming content is clearly growing in importance, and within it, ad-supported streaming is, too. Over the past couple of years Nielsen has helpfully begun producing their monthly “The Gauge” release, which I wrote about here last week. Assessing the share of viewing that streaming accounts for today is important, but predicting the near-term future is even more important. One of the key factors driving future growth of streaming content is cord-cutting, where consumers are eliminating their traditional pay TV services, with growth in vMVPDs such as YouTube TV, Hulu+ Live or Sling failing to offset a broader pay TV industry decline.
It’s likely that by the end of 2024, pay TV will hit 50% penetration, down from 90% as recently as 2012. This will likely disproportionately impact traditional cable programming, but will negatively impact the reach potential for all traditional ad-supported TV.
To explore the impact of this issue, the aforementioned viewing share-shift to streaming and others around the upcoming US national TV upfront negotiations and television advertising more broadly, I recently spoke with Roku’s Dan Robbins. An edited transcript of the interview follows.
Source: Madison and Wall, TVB, Nielsen, Company Reports
The interview is lightly edited for clarity and brought to you in partnership with Roku.
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I’ve known Dan Robbins, VP of Ad Marketing & Partner Solutions at Roku, for many years. He leads research & analytics, business marketing, and creative services for Roku’s ad business. We’re both passionate students of the media industry. So, as we head into the Upfronts this May -- the annual negotiating season where a large portion of the $40 billion+ in national TV industry is allocated for the year ahead -- I wanted to check in with Dan to discuss how the growth of streaming might impact the market.
Welcome, Dan. My first question: what drew you to your role at Roku?
Dan: Roku’s vision has always been that all TV will be streamed. It started with our first streaming player and has grown into a platform where the whole is greater than the sum of the parts. We’re the No. 1 TV streaming platform in the U.S., Canada, and Mexico,* run a leading streaming service in The Roku Channel, create entirely ad-supported Roku Originals, built an ad buying platform in OneView, and more. We now reach about half of all broadband homes in America.[1]
I've been at Roku for about six years. What drew me here was that each big shift in technology tends to usher in a new leading platform. It was Windows and Mac for the PC. It was iOS and Android for mobile. Roku was built for today’s shift to streaming. Getting a front-row seat has been very exciting. It’s like being a geologist who gets to see a new continent emerge in real-time.
Brian: So, I've argued that there's a direct relationship between share of content investment and share of viewing. In streaming, there’s a good amount of ad-free content and then ad-supported content often has lighter ad loads. It seems this limits the available opportunity for advertisers.
Dan: Well, I think first it's helpful to level set where the industry stands today. Only about 50% of America still has traditional pay TV – down from about 90% just years ago. Streaming has now surpassed broadcast and cable in time spent. Additionally, ad-supported streaming is growing faster than streaming overall. So, there’s a lot of momentum for streaming and advertising.
You raise an interesting point, though, which is what is the terminal opportunity? I would reframe it a bit. TV advertising used to be just about the ad break. However, TV now starts well before the stream and goes on long after. Video advertising is a big part of that. But, it’s bigger than just borrowing thirty seconds of time. Brands that want to be unmissable are getting involved in content discovery, in shoppable moments, and more. It goes all the way from power on to purchase complete.
Brian: One reason network TV has historically had an advantage in the Upfronts is efficient reach. If you buy anything other than network first, you potentially get unintended audience duplication or excess frequency. That was true in a world where 80% or 90% of the population watched networks each month. But, to your point, I don't think the numbers are anywhere close to that anymore. Where would you say is the tipping point?
Dan: We're already there. We see in our own linear TV data that many broadcast and cable networks now have 80% or 90% duplication with each other. Only one linear network still delivers an average audience above 1 million people nightly for adults 18-49 anymore. So, starting with broadcast or cable and just rolling that into streaming misses the real opportunity. The leading brands are now flipping the script this upfront.
Brian: What about TikTok – so long as it exists in the US – or YouTube? Personally, I’m on the fence where the industry will go. I can see an advertiser saying, "Hey, we only want the brand equity of Hollywood content in our definition of television." But I can squint and see another saying, “Eh, the user-generated videos – I guess they’re good enough to be TV.”
Dan: I think you’re right that it may depend on the brand. Many are buying TV because they want quality sight, sound, and motion. They want to tell a non-skippable story. They want to go to bed without worrying they’ll get a call in the middle of the night about brand safety.
Brian: How about for an advertiser that’s more digital-centric and e-commerce centric though? What is the role for TV there, or should they frankly just stick to all things digital where they’re already comfortable?
Dan: Lots of direct-to-consumer brands have already hit a point where they’re expanding beyond search or social. These channels are getting more expensive for them because cookies and Mobile Ad IDs are less reliable. In streaming, there’s a direct relationship with the consumer. The identity data is strong to both personalize ads and to measure results. That’s driving momentum for TV.
Second, we’re moving to a world where shopping on TV can be as easy as it is on social. For instance, our partnership with Walmart means you can press “ok” with your remote on an ad and Walmart delivers it to your door. That changes the calculus for direct-to-consumer brands, too.
Brian: So, there's been a long-standing dream to, say, buy Jennifer Aniston's sweater. Poor, Jennifer Aniston, she probably likes her sweaters. But, why do you think that that never really took off and what's different now?
Dan: It’s the tech. TV is now fully internet enabled. For instance, Roku Pay, which is our payments platform, makes the shoppable ad experience seamless. You don’t need to punch in your credit card every time. You don’t need to fumble with your phone trying to scan a QR code.
Also, the consumer behavior has changed. We’ve all learned to buy things on our phones. So, you then realize buying on your TV actually isn’t that different. There’s still time for Jennifer!
Brian: Hopefully! Shifting gears a bit, how much of this Upfront do you think will be programmatic?
Dan: Most upfronts aren’t programmatic yet, but it’s certainly gaining traction. A big reason is many brands want to buy the platform, not the pieces. You don’t want your ads colliding. You want to change your plans in real time. You want to make measurement more straightforward. You want to be unmissable. That’s been our philosophy for OneView, our ad buying platform built for streaming.
Brian: One programmatic-specific issue that's come up is whether people are in front of the screen. What is Roku doing to make sure that ads are being delivered to actual humans?
Dan: Yes, it’s very important. As a true platform, ad quality is something we're uniquely positioned to deliver. First, all Roku players go inactive when we get a signal that a TV is no longer on. Second, we’ve launched “Are You Still Watching” across all Roku devices. It checks whether someone is still watching and otherwise closes the channel. Also, we’ve integrated third party measurement like IAS, DoubleVerify and others to offer transparency for ad quality. It’s why not all streaming TV ad inventory is created equal. The power of the platform makes it all work harder.
Brian: What about excess frequency? I see it when watching some streaming channels and the same ad runs endlessly. Clearly no frequency capping. Or maybe the brand is bidding through multiple channels that are clearly not talking to each other. Who’s the onus on for that?
Dan: You know, we’re a consumer company. We must earn the right to be in living rooms across America. When viewers have a bad ad experience, they don’t call a data consortium or a DSP. They go to the brand they know. We know our viewers – who they are and what they like. The consumer experience can really fall apart when you don’t start with real identity data. It's a big reason why we launched OneView. We wanted to use our scale and tech to do better by both our consumers and our advertisers.
Brian: Yeah, I can see a direct consumer relationship being important going forward. It’s certainly a fascinating space.
Dan: Very much agreed. Our founder and CEO, Anthony Wood, likes to say that it’s a great time to be in TV. And heading into Upfronts, we certainly feel that’s the case.
* based on hours streamed, Dec 2022, Hypothesis Group
[1] Source: ITU, FCC