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.