OTT Distribution Platforms Gain Leverage Against Streamers

Customers setting up their new PlayStation 5 consoles this holiday season can assemble their media hubs with the streaming apps of their choice. But they will be nudged to use six apps over the rest: Disney+, Hulu, Prime Video, Peacock, YouTube and Netflix. It's prime real estate for streamers. And when you consider that nearly every smart TV and game console being sold this holiday season has its own landing page with recommended apps, you can see the size of the hurdle streaming services face in the race for consumer attention. Behind the scenes, streamers and connected platforms are hammering out new carriage rules, which stands to influence the winners and losers of the new streaming era. “Because of this influx of services, because of this influx of content and because there’s almost too much content out there, we’re getting to a place where distribution is more important than content,” said Tal Chalozin, chief technology officer and co-founder of video advertising platform Innovid. But it wasn’t always this way. Fledgling distributors once needed big-name streamers like Netflix to convince customers to buy their devices. After all, what’s the point of buying a streaming stick or smart TV if you can’t stream Netflix on it? But as connected TV devices’ audience base has grown and as the streaming space grows more fragmented, the platforms now find themselves with more leverage. “For the first time, what you’ve seen is that those devices have the upper hand in these negotiations,” Chalozin said. Distribution Deal-Breakers Here are some of the biggest disagreements between platforms and streamers that hold up distribution deals: Ad inventory: App owners are generally expected to give 30% of their available ad load for streaming devices to monetize, Chalozin said. That can be a hard sell if a streamer wants to maintain control over all of their inventory and monetize as they see fit. Data: Streaming service owners are also expected to share data about their audience with devices, though some may want to keep that information close. Plus, the amount of data coming back to streamers may become less specific if that service is integrated into a distributor’s list of “channels" viewers can subscribe to. Subscription fees: Streaming services that require or offer subscriptions often must pony up a percentage of their subscription fees to platforms if subscribers sign up directly through the connected TV platforms themselves. Some streamers have been quick to recognize that good distribution is the quickest way to audience growth. Take Vix, the free ad-supported Spanish-language streamer, which has broad distribution agreements and broke into the top five apps on Roku earlier this year. “You’ve got to go fish where the fish are, and being on those devices and those platforms is where the eyeballs are,” said Rich Hull, head of streaming platforms and chief strategy officer of Vix. “We’ve gotten very good at making those kinds of partnerships that allow us to punch a bit above our weight.” New streamers Peacock from NBCUniversal and HBO Max from WarnerMedia were both unavailable on Amazon Fire TV and Roku devices when they debuted earlier this year, leading to soft initial subscriber numbers. It took months for Peacock and Roku to strike up a deal—and even longer for HBO Max and Amazon Fire TV—and both streamers still have large distribution gaps. Neither streamer has seen nearly the same growth as rival Disney+, which debuted across nearly all major platforms and has seen stratospheric subscriber growth of more than 73 million. (Roku and Amazon Fire TV together comprise more than 86 million devices.) Fighting over distribution poses a risk of dampening advertiser interest. “From an investment perspective, scale and the ability to reach unique audiences are critical factors within the consideration set,” said Cristina Ferruggiari, svp, group director, video investments, Havas Media. “Both factors go hand in hand with platform distribution agreements being in place.” With that said, there’s a lot at stake around the terms governing data-sharing and ad inventory. The deals of today stand to shape the way business is done for years. “The reason that all of the networks and distributors are really fistfighting is because it’s this time when you start to set precedents,” Chalozin said. “One of them is the ad percentage that the owner gets, and the second one is data.” It’s a new form of a decades-old dynamic that has plagued the industry. But that doesn’t mean distributors and streamers will always be at odds. In fact, they maintain, it’s in everyone’s interest—especially the consumers’—to play together in the same sandbox. “The second these deals are done, we work hand in hand to grow audiences,” said Alison Levin, vp, global ad revenue and marketing solutions, Roku. “We want them to win, and when they win, we win.”

Streaming & OTT

OTT Distribution Platforms Gain Leverage in Standoff With Streamers

Balance of power shifts to gatekeepers like Roku and PlayStation

Kelsey Sutton

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Kelsey Sutton