This article is not to announce the demise of linear TV or the ad sales business. On the contrary, it explores how the traditional ad sales model of linear TV can be extended to on-demand services and mobile devices. Over recent years, on-demand services have exploded onto the scene. Subscription and pay-per-view services have been embraced as the next best thing since television.
Linear broadcasters, who mainly rely on ad sales for their revenue, were taken aback at first. But now telecom operators open the doors for broadcasters to distribute their quality content on their infrastructure.
This new alliance raises evident questions about the business models. Platform operators could pay for the content, linear broadcasters for the infrastructure, and viewers for the service. But why not rely on airing commercials, a business model that is so familiar to broadcasters? Broadcasters already have the people and processes in-house to sell commercial airtime space.
Invisible on-demand viewers
On linear TV, commercial airtime is sold to media agencies, with a commitment to reach a specific number of eyeballs over a well-defined period. This process immediately uncovers the problems run into when applying this sales model to an on-demand service.
First of all, the life span of commercials seldom matches the life span of the on-demand content. Secondly, in practice, viewer ratings are not as readily available for on-demand services. Although most on-demand platform operators know their consumers by name and can keep a 100-percent accurate consumption log, they are hesitant to share this strategic data. Although rating companies like Nielsen are addressing this problem, and data might become available in the near future, on-demand platform viewers remain almost invisible to media agencies for now.
A more technical problem is the life cycle difference between primary content and commercials. Content from the broadcaster is delivered to the on-demand operator as a monolithic video file documented with metadata in an accompanying XML file. Although bandwidth has become cheap, the technical challenges still lie in the creation, handling and distribution of this “big” video file.
The broadcaster prepares the video file by packing the main content with audio tracks, subtitling information, on-screen logos and branding. If the broadcaster wants to add trailers or commercials, it has to do it now as well. All source material is packed together and transcoded into one single file that is ready to be encoded into the format required by the on-demand operator. With the upcoming 2K or 4K formats, these files will only grow in size (10GB or more is not uncommon), which makes encoding and transporting files a time-consuming and costly affair — even with the newest compression formats like HEVC.
Yes, size really does matter. The process of delivering big monolithic files to platform operators is not suited for the more dynamic, short life span of a scheduled commercial. In order to reach enough eyeballs in a limited time, commercials have to be aired around all of the broadcaster’s on-demand content, similar to scheduling a commercial around multiple programs on a linear service. In order to run multiple campaigns at the same time, it is likely that all of the content would have to be repackaged, encoded and delivered again to the platform operator on a daily basis. This results in hundreds or thousands of files. Given the required manpower and the current encoding capacity and transfer rates, refreshing all the content all the time is an impractical and expensive proposition.
Ad insertion and product placement
So why not use an entirely different technique, such as ad insertion or product placement?
With ad insertion, no ads are embedded in the main content. The content is delivered to the platform operator, and it is the downstream process that inserts ads. This might be on the platform side or even on the user device itself, such as the browser, set-top box or mobile device. The Sky AdSmart platform in the UK is an example of this. But this revenue stream is owned by the platform operators. At best, broadcasters can claim a revenue share for providing their content.
Product placement is also a difficult option for the broadcaster, as the revenue is generated by the production teams. And even with digital techniques — such as MirriAd, which can virtually place products into a scene — the revenue will go to the companies controlling the device, i.e. the platform operators.
Sync up with the content life cycle
The best way forward that makes economic sense to broadcasters is to set up an ad sales process that is in sync with the life cycle of the on-demand content. This can best be achieved by using on-demand scheduling tools that are fully integrated with the linear scheduling process, asset management and the broadcast infrastructure. This strategy can open up new ad sales opportunities on VOD platforms that would otherwise remain out of reach for broadcasters.
Content on a VOD platform has a typical life cycle. The content is first released on a premium pay or subscription service. Later on, it gets aired on linear TV supplemented with a catch-up service, or even with preview or start-over options. After this stage, the content is made available in a catalogue of topical content, to finally end up in a larger catalogue of “older” content, which is then available for a long period on all imaginable devices. In accordance with the long-tail principle, the number of viewers decreases as it goes from the premium content stage to the point where the content is buried somewhere in a catalogue.
Commercials are unlikely to be scheduled on a paying service, but in this first stage of the life cycle, promotion clips and secondary branding events are added to the content. The first ad sales opportunity on VOD would be on a catch-up service. At this point in time, the content has recently been aired on a linear channel with commercials. A good and simple proposition is to “record” the linear broadcast — including all the commercials, promotions and branding items — and regard this recording as the single source file for VOD.
In the first week, the original commercial campaigns are more than likely still aired. The ratings — and, hence, revenues — from catch-up services can simply be added to the ratings of the linear broadcast. If broadcasters want commercials or promotions that differ from the original linear broadcast, they can make use of a feature like a mini-playlist.
After a week, the original commercial campaigns are generally no longer aired, and ratings from VOD services are no longer measured. From this moment on, it is advised to plan different and more long-lived promotions and commercials. The on-demand content life cycle has entered a new stage.
Modern scheduling systems make it possible to choose from different levels of complexity when adding commercials and interstitials to on-demand content. The first option is to add a single opening and closing clip to the desired content. When multiple items need to be added to the VOD content (as is the case when scheduling commercials), the use of templates is advised. Each template contains actual commercials and promotions that are added to an entire service in one operation.
The last and most flexible way is to schedule promotions and commercials for on-demand content in the so-called mini-playlist, which allows planners to create an individual playlist for every piece of on-demand content. The user then schedules promotions, commercials and even secondary events as if it were a single transmission on a linear channel. In this set-up, the well-established commercial integration used for linear TV, as well as the automatic scheduling of promotions and secondary events, can be used to prepare on-demand content extremely efficiently at low cost.
By using the logic of the mini-playlists, even the standard linear broadcast infrastructures can be used to render the big monolithic files, rather than solely relying on the graphical capabilities of MAM or transcoding environments. The major benefit of mini-playlists is that the software systems, processes and infrastructure of the well-known linear world are used for the preparation of on-demand services, which dramatically increases the versatility and speed of the VOD material workflow.
Ready for new revenue streams
It is clear that on-demand services are here to stay and that the broadcaster’s need for a flexible, efficient and cost-effective material preparation workflow becomes imperative. Innovative tools like the mini-playlist seamlessly bridge the gap between the well-established ad sales model from the linear world and the jungle of opportunities in the on-demand universe. This is the kind of development that can truly turn new technologies into new revenue streams.
—Emmanuel Müller is business development director at MediaGenixc.