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Straight Talk Media & Entertainment

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Social platforms are increasingly morphing into media – specifically video – companies. In May 2017, we saw exclusive and original ad-supported content announcements from Twitter and YouTube. Reports of ad-supported short- and long-form video content deals between Facebook and several digital-first publishers have also surfaced. Snap, meanwhile, is increasing its focus on longer-form – at least in Snapchat's context – video content that it refers to as "Snapchat Shows." However, while such platforms' movement into long-form content deals marks further movement into the space of traditional-TV and premium-OTT video players, broadcasters need not fear them (and can even make use of them). Here's why:

  • TV advertising will continue to dwarf digital video advertising over the next five years. Ovum forecasts that global digital video advertising revenues will effectively double between now and 2021, to reach $52bn. Despite this impressive growth, digital video ad revenues will still only be around a quarter of the size of the $191bn global net total TV advertising revenues generated that year, as they too continue to grow. Ovum expects digital video ad spending – much of which will be accounted for by YouTube and Facebook, with the likes of Snap also growing its share – to be largely complementary, rather than cannibalistic, to TV ad spending. This will come as advertisers continue to value the quality, curation, and reliability of both content and audiences offered by TV operators and broadcasters.

  • Competing directly on premium video would seriously reduce social players’ profitability. Facebook has long relied on rapid organic growth in users and time spent on its platform to drive revenues at a higher rate than operating expenses. But this will become unsustainable as Facebook user penetration and ad load reach their saturation points. Getting users to watching long-form video on Facebook is one means of increasing its ad-load capacity but, unlike TV, Facebook – along with other social platforms – is still unproven when it comes to the distribution of compelling, premium content. Its content deals with millennial-focused digital media companies have value, but acquiring the kind of content necessary to truly compete with the likes of TV operators and Netflix will be highly expensive, require long-term investment, and – although affordable for a company of Facebook's scale – have a significant impact on its business model and profitability. Make no mistake, Facebook's main goal here is to remain at the center of consumers' lives and monetize that position in any way possible, rather than to enter direct long-term competition with TV players.

  • TV continues to dominate watch time, even for millennials. Although time spent watching online video continues to grow, traditional TV still occupies the clear majority of consumers' time spent with video among all age groups. And, although millennial consumers now spend much less time with TV than their older counterparts, social video platforms represent an opportunity – not just a threat – to broadcasters. YouTube recently announced that the watch time of TV channels on YouTube grew by 50% in 2016. Meanwhile, broadcasters such as the BBC, Discovery, NBCUniversal, and, most recently, CBS have partnered with Snap to bring adapted versions of their TV content, or original content, to Snapchat. Rather than fear them, TV players should embrace social video platforms as an opportunity to reach and stay relevant to young viewers who are turning away from their TV channels.

Straight Talk is a weekly briefing from the desk of the Chief Research Officer. To receive this newsletter by email, please contact us.

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