Cutting the Cord

Cord Cutting: An Introduction to OTT Advertising

Since streaming television first debuted in 2010, cord-cutting” has been sweeping our cable-loving nation. OTT (over-the-top) media providers Netflix, Hulu, YouTube TV, Amazon Prime, Sling TV, and Roku continue to displace cable and satellite programmers like Comcast, Time Warner, CenturyLink, DISH and DirecTV. Local terrestrial television stations are also losing viewers to OTT audiences.

In the words of Aaron Pressman, Fortune After companies from cable giant Comcast to satellite TV titan AT&T, which owns DirecTV, reported their fourth quarter results, the total number of pay TV subscribers dropped 3.4% from a year earlier, the highest rate of decline since the trend of cord cutting emerged in 2010…”

To combat OTT competitors, cable and satellite television companies have started offering “skinny bundles” or curated channels specific to each household. This means fewer eyeballs are watching many beloved network television shows. Lower ratings mean less advertising dollars for these programs. Budgets for talent are being slashed and production values are decreasing.

What does this all mean for television advertisers?

Affordability

OTT advertising spots are generally significantly less expensive than traditional pay TV or terrestrial spots. Local television stations and cable providers can provide estimated CPM’s (cost per thousand impressions), but they are much higher than OTT CPM’s for prime programming.

Measurement

Ads served through OTT are accurately measured by impressions. Cable and terrestrial ads are purchased and invoiced with “hypothetical” audience measurement tools. OTT is accurate while traditional pay TV audience measurement is an educated guess.

Advertising Viewership

When viewers watch cable or terrestrial television, it’s easy to skip advertising by changing channels. With OTT, to avoid advertising, viewers must exit the programming completely. OTT advertising spots have much higher completion rates.

Younger Audiences

The majority of OTT viewers are below the age of 35. Women 25-54 are the most coveted demo by advertisers and can be effectively reached through OTT advertising. Skipping OTT means advertisers are missing a portion of this highly-valued audience.

Geo-Targeting

OTT ads can be geo-targeted ZIP code, neighborhood or specific address. Advertisers can use their own customer list for OTT targeting. Terrestrial ads target an entire DMA. Cable offers “zones.” OTT can reach specific addresses.

This being said, according to Jason Lynch, Adweek “It is important to note that while millions of household are cord-cutting, the OTT-only number represents less than one-sixth of the 90.3 million U.S. households (74 percent overall) that have a cable, telco or satellite subscription. And 70 percent of households with OTT capabilities also have a cable subscription, indicating that OTT (advertising) offerings are still largely supplemental for most U.S. viewers.”

So while the cord-cutting trend continues to gradually transform the relationship between media and advertising, there’s value in striking a balance in media spending between pay TV and OTT. It’s also not an unfamiliar tale – the same type of progression took place in the shift from print media to broadcast television some 70 odd years ago.

Royle Media utilizes Simpli.fi as its premier programmatic advertising platform. Through the use of video, display, and banner campaigns we target prospects by geography, demographics, psychographics and buying behaviors. With OTT advertising spots being purchased every month, clients can count on our expert knowledge and experience to meet all their digital media buying needs. Read more about our digital media buying platforms here.

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