Connected-TV adoption has grown quickly in the UK over the past decade, but CTV advertising hasn’t yet fulfilled its potential. Here Bill Swanson, VP EMEA at Telaria, looks at the UK’s specific hurdles to CTV advertising’s growth, and which lessons the UK market can learn from the US.
Markets are driven by the basics of supply and demand, and connected TV (CTV) is no exception. In under a decade, UK streaming subscriptions have grown from a standing start to hitting nearly half of British homes (47 percent), and overall CTV user numbers now top 34 million. Telaria’s research has also shown streaming is now seen as just ‘watching TV’ for 57 percent of consumers.
The boom times should be rolling, especially for CTV advertising – but they haven’t quite arrived. Anticipation is high, as is eagerness among content creators to deliver the flexible, multi-channel premium video experiences that audiences want; with the BBC and ITV joining forces with the launch of BritBox, billed as the UK’s answer to Netflix, and Disney+ and Apple TV+ also arriving soon on UK screens.
Several barriers, however, are blocking the road to progress. Before the UK can enter the next golden age of digitised TV prosperity, there are some final hurdles to overcome.
Releasing confined content
The UK CTV industry has a strong example to follow – the US. Both US audiences and industry players have adapted quickly to TV’s global digital evolution and more importantly the consumer consumption habits. Not only is adoption of subscription video on-demand high (SVOD) — with 80 percent of internet users paying for at least one service – but ad-supported VOD (AVOD) is thriving; driving revenues of $7.7 billion in North America this year, and set to reach $20.3 billion by 2024.
Much of this success is down to an emphasis on producing high quality content; with Netflix spending $13 billion on acquiring and generating content last year and Amazon set to invest $7 billion in music and video content in 2019. In addition to helping platforms stay competitive, this steady flow of original content has fuelled industry growth. Varied premium content attracts bigger audiences, pushing rivals to bolster their offerings by generating more content and making licensing deals.
In comparison, the current UK video landscape is in the early stage of growth. Content providers and broadcasters such as Channel 4 typically house any content they create in their own exclusive platforms. While there are some exceptions, including the BBC-ITV Britbox initiative, the majority of content is split between a cluster of services, limiting choice for audiences and scale. This situation isn’t helped by the fact that even when content creators do sell licenses, deals are often long, complex and made through restrictive legacy partnerships. Clearly, there is a need for greater collaboration if the CTV space is to reach its potential. The UK must learn from US leaders and embrace flexible licensing, cross-platform unions, and greater original content generation.
Realising AVOD’s potential
It’s a mark of evolving monetisation models and sector maturity that some key US platforms have begun to leverage advertising alongside subscription paid access. Content creators recognise that varied monetisation options will be essential to future proof their businesses, as market expansion sees SVOD costs rising, and audiences increasingly unwilling to pay for a myriad of services. They also appreciate the advertiser interest that growing audiences and enhanced supply bring. With a wider range of inventory and huge reach, streaming platforms are an attractive prospect for brands looking to connect with CTV viewers.
Enhancing content creation and distribution will automatically put UK providers in a better position to boost advertising income. But they must be prepared to seize the opportunity. So far, an urge to stick with tried-and-tested monetisation methods has seen streaming company models firmly rooted around subscriptions. To achieve sustainable growth, the industry will have to change — and that will require an uptick in the number of platforms using AVOD, and ideally, a UK-built AVOD-specific platform designed for the British content and regulatory climate.
Achieving scale through programmatic
It’s clear that the number of streaming subscriptions and connected TV users in the UK is growing, as is the ratio of digital:linear viewing time, which has already reached 90 minutes per day. When we look at digital video ad spend, however, while this is increasing year on year and now accounts for over half of total display ad spend, its growth is beginning to plateau.
According to the Digital Publishers Revenue Index (DPRI), a quarterly report on UK publishing from the Association for Online Publishing (AOP) and Deloitte, digital video publisher revenues decreased by ten percent on a 12-month rolling basis to March 2019, while subscription revenues grew by four percent during the same period.
So, despite wider audiences and the growth in video ad spend, revenues are shrinking. This is due in part to the UK’s strict programming procedures and stringent advertising guidelines, which can create barriers to auction-based transactions, resulting in the slow adoption of programmatic by traditional UK broadcast companies. The development of innovative technical solutions needs to be a priority if we want the benefits of CTV to really manifest via programmatic advertising. Updating a legacy linear industry with such strong regulation will be no mean feat but, with growing digital audiences, the rewards to publishers/broadcast and advertisers will be great.
Ultimately, there’s a real need to overcome these hurdles and allow CTV advertising to bring prosperity to the UK’s digitised TV ecosystem. CTV brings together the best of digital and linear TV worlds and provides rich data – from viewability to time spent, to brand awareness and household capping. It also offers transparency to advertisers and allows them to effectively measure ROI. On top of this, fraud is almost non-existent and brand safety is vastly improved in comparison to display advertising.
This is a truly revolutionary opportunity and publishers and broadcasters want to harness this revenue potential. They want fewer but better, and more transparent, tools to be able to monetise and manage their video inventory – while keeping control and optimising the user experience. They know what they want, and are close to achieving this; the next 18 months will be interesting times as the UK market accelerates to overcome the hurdles to CTV success.