Say goodbye to linear TV and hello to the new age of cord-cutter services

The CEO of video advertising firm SpotX, Mike Shehan, details the new trends disrupting the world of broadcasters – in conversation with Mumbrella Asia’s Eleanor Dickinson

What did you think of last week’s news that YouTube will abolish unskippable 30-second ads in 2018?

“YouTube operates in a different economy in such huge, huge volume; it can still offer up different services to advertisers where they get the impressions they want and allow the element of skippability to the consumer, which I think is great.

“I’ve nothing against being able to skip ads; Ad-blocking is the result of a user-experience that a lot of consumers are rejecting. That can be because of the length of the ads, the heavy ad loads and the time it takes to get to the content.

“But, at the same time, there needs to be a fair trade; you’re either going to have to pay for the Netflix-style ad-free experience or you’re going to watch some free content – but then the cost will be watching some ads. What YouTube is doing is great. When you start going outside the YouTube ecosystem, it becomes harder for publishers to sell unskippable ads because they do not have the volume of traffic. The internet is about choice and flexibility.”

Should YouTube also axe its remaining 20-second and six-second ads too?

“We know that brand advertising is incredibly effective; we know that from television and we know brands are willing to pay to make it work digitally. You have to make that impression somehow. But, if you go back to when YouTube was first bought by Google, Eric Schmidt said they would never have pre-roll ads.Then two years later, they have pre-roll ads. It was the ad industry that said to YouTube, if you want to make money from this, then take what we have; we’re willing to pay for a brand experience using the commercial assets that we have for TV.

“In the United States they have just announced what they’re calling a ‘skinny bundle’, but it’s eventually going to happen around the world. A lot of customers at the moment are saying they’re not going to pay for their cable, their satellites – they’re cutting them off. The reason being because instead of US$150, consumers can pay US$60 for their broadband and sign up for a ‘skinny bundle’ for live television, from a service provider like Commcast and Hulu. It’s your TV programming without a satellite and just your internet. And now YouTube has just announced that they have become the fifth US multi-platform provider to offer skinny bundle live broadcasting and catch-up services. How do you replace a live linear programme when you have 90 second ad break? You can’t. So that’s going to be the challenge for advertisers.”

And how do you think such a trend will take off in Asia?

“It’s a really interesting dynamic and of course I don’t pretend to be an expert in each individual market like the Philippines or Vietnam, but I know some of the biggest threats to free-to-air television is piracy. Piracy is rampant in this part of the world. Anecdotally, one person was telling me how their child just ran and bought a box for US$170 and that gave them all this programming without having to go to the cable company.

“There is one thing you find here that you do not anywhere else, not in the US nor in Europe, and that is all the broadcasters and the programmers put their content on YouTube. In the US and Europe, there is of course the trade – you have to pay to put that content on YouTube.
Broadcasters [in those markets] have to negotiate with the carriers, the cable companies. But the next cable company is Google, through YouTube, and they own all the data and all the audience. And the fact that here they are giving away all their content here in this region. Well, it really surprises me.

Why is that happening in this region particularly?

“I don’t know, I want to find out. It maybe different country-by-country. I’m talking largely about Singapore and the surrounding region. So Indonesia and Vietnam – those are the places I have been having conversations about this. But where is this region going? I think in countries where there is high broadband or mobile usage, and where there is already a high number using cable subscriptions to get programming. That is where the US model will follow. And that is people cutting their cable and satellite subscriptions and getting their programming through over-the-top services, either on their mobile phone or in their house.

“And then you have streaming box Roku. It did a deal with the biggest telecommunications company in Australia, Telstra. Now Roku is providing live television streaming services and catch-up TV, but it’s branded Telstra. And that’s the challenge that’s really disrupting the whole industry: consumers are now watching their content via an internet protocol address and not a broadcast provider. With that, you can start to customise the content and the ads that are delivered. Ultimately, I don’t know if it will be in 10 or 50 years, but everything will be IP-based and delivered to an IP box. And that’s where the challenge really is. If you’re used to selling advertising against a broadcast stream and you know that model, when that gets totally disrupted – what do you do? The challenge is almost too overwhelming to appreciate in every single country.”

And how will these buying models be further disrupted by the rise of programmatic?

“Eventually we will stop saying the word programmatic,we will just say buying and selling inventory. Because eventually everything is going to be automated in some way or another. The tipping point is when you start to deliver ads on a guaranteed basis; when the buyer and seller work together to say ‘I will sell this many impressions for this rate’ and the two programmatic systems actually execute that order. That’s known as ‘programmatic guaranteed’. That will be when the pendulum swings and we say, why are we not programmatic any more? It’s just selling and buying. We’re hitting an inflexion point and soon we will not even talk about it anymore. Like real-time bidding, which we don’t say anymore.”

Keeping in mind SpotX’s deal last August with Korean programmatic company Anypoint Media, is that ‘inflexion’ point’ likely to happen in Asian markets any time soon?

“It’s about infrastructure and what’s in place already. Most TVs these days are Smart TVs, but not everyone connects it to the wi-fi and gets their programming from it. Anypoint was important to us. We were actually surprised when we got that deal – things were happening faster than we thought. And then what’s happening in the US over the last two years has thrown us off guard. Two years ago, I was breaking my shoulder trying to get through the door of the satellite and the cable companies; now we work with all of the skinny bundle providers. That happened in a period of just 12 months. This showed me that this could start happening around the world, but one thing I have learnt is that you have to appreciate the dynamics in every country individually. Because in some places the old models may just stay in place a lot longer than expected.”


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