Cable and broadcast networks are rivals, that much we know.
For years they have competed with each other for advertiser dollars, content and, more recently, for views online. But in the past month several networks announced they were collaborating to create a consortium.
So what happened? The answer is simple: the aim is to keep TV ad dollars from migrating to digital media.
In early April, Fox Networks Group, Turner and Viacom announced the specifics in the formation of OpenAP. The intention is to provide the ad marketplace with data-driven solutions that allow for more precise targeting that goes beyond the traditional demographic breaks used in TV buying.
The consortium is in response to advertisers’ desire to use more targeted solutions, “lower in the funnel” and closer to purchase. This is an advantage digital media has claimed over television.
Besides advertisers’ desire for more granular audience data, the announcement was made one month prior to the 2017-18 upfront presentations. Several media prognosticators have also announced that digital ad spending will soon surpass television.
The news came a few weeks after NBCU said they would be allocating $1 billion worth of advertising inventory to data-driven buys for the upcoming season.
In April, it was reported by Bloomberg that AMC Networks, Scripps Interactive and Discovery Communications were in talks to create their own over-the-top streaming service. The cost to potential subscribers would be under $20 each month. That’s lower than current OTT services from DISH, Sony, AT&T, YouTube and Hulu. (Click here for cost and programming comparisons).
The reason for the lower rate is the lack of sports programming in the package. ESPN and regional sports networks have the highest retransmission fees, which are passed on by cable systems to subscribers, increasing the cost. (It’s estimated that upwards of 40 percent of subscriber’s monthly cost comes from sports networks.) The networks hope this potential consortium will appeal to non-sports fans.
Although the penetration of OTT services is low (an estimated 2 percent of all homes subscribe) and whether it is a sustainable business model is open to question, it does point out the concerns cable networks have, as cost-conscious consumers (especially young adults) have dropped or reduced their cable service and are spending more time streaming their favorite content.
Whether either of these consortia created by rival networks breaks down over time remains to be seen. But for the time being, you have to give them credit for adjusting to the pressures of advertisers, consumers and continued competition from digital media. This is something few would have foreseen just one year ago.
As the great journalist Helen Thomas once said “war makes strange bedfellows.” The same can be said for digital media.