AOL could be on track for its own “House of Cards moment” as it continues to drive its original content and connected TV strategy, the latter stage of which has seen it launch on Apple TV.
Although AOL operates in the ad-funded video-on-demand (AVOD) arena, while Netflix dominates the subscription (SVOD) one, it is gradually increasing its long-form original content investment having bought its first international, long-form series – Connected - this year.
Speaking to The Drum, AOL’s global head of video Ran Harnevo said the two companies operate in a totally different arena but described Netflix as being like “the north star”, and added that the success of its slate of original programming – House of Cards – helped “break down a barrier” conceptually for the whole industry.
“When presenting I often begin by asking how many people watched House of Cards, to which most raise their hands. I then ask them how many watched it on TV, to which they again raise their hands, and I have to correct them – 'no you didn’t watch it on TV.' Then of course that brings up the whole question of what defines TV now.”
Although the kinds of budgets that subscription-driven services like Netflix can channel into original content commissioning currently outstrip those of ad-funded business models, ad-funded players will arrive there, just at a much slower pace of investment, according to Harnevo.
“There is AVOD and SVOD – two different economies – and SVOD is a hard business to get into. I don’t think AVOD companies like AOL should immediately go in [to SVOD arena] there and spend Netflix money, we will get there but it will be a more slow progress of investment.
“The more we scale we will get there, we will have our House of Cards moment. We actually bought an international long-form show this year, we are doing a long-form series of 20 episodes, 30 minutes each. That’s the first time we have done it and the reason why is we are doing connected TVs like crazy – so we finally have a screen where we can go long form. AOL has never invested so much in original production,” he said.
AOL has invested in 16 new shows this year, 15 of which will be available in the UK, the inventory of which has been sold already in the US and by Group M in Canada. They will be showcased at Digital Upfronts in the UK later this year.
Harnevo said the current online video landscape both in the US and UK remains too fragmented, and that to succeed businesses must either unite the distribution and content parts of their business, as AOL and Netflix have done, or collaborate with companies that can offer the side that is missing.
Unlike display inventory, where the supply far outstrips demand, premium video inventory remains in short supply. “Everyone needs more video views and the reality is people need to start working together and sharing video and collaborating to make it grow. Scale will come through collaboration in a fragmented world….fragmentation is the enemy of every publisher.”
In the US AOL has now put all video inventory it hasn’t sold as a direct deal into its private marketplace, and will open up the same capability to the UK market in time.
However, Harnevo believes there are still major misunderstandings around what programmatic trading really means. "Services like Uber and AirBnB are programmatic - they are marketplaces and they create efficiency.
“It is just a technology that makes things more efficient – like in the stock market. People think it refers to taking prices down, that it’s about quality of content - but that’s bullshit – it’s just a technology. Take Wall Street – everything was traded manually and technology has changed it forever – but it didn’t take the market down…
“Display has always been an industry where supply is bigger than demand – that’s not the case for video. Regardless, looking at the inventory that exists in programmatic platforms now, and taking the conclusion that that’s what programmatic represents is visionless to say the least.”
Yesterday AOL revealed the latest stage of its connected TV strategy with the launch of its 900,000-strong video catalogue on Apple TV, which will pull in videos from its other properties including The Huffington Post, Tech Crunch and other partners including ESPN and the New York Times.
Meanwhile earlier this year it launched its first linear TV service in the US, which Harnevo said is “doing very well”, but that connected TVs remain in their infancy and are yet to reach their potential.
However, in time advertisers will begin to put pressure on broadcasters to grant them the ability to trade video programmatically, a scenario the TV world is not yet ready for, according to Harnevo.
“There is an element of fear of machines downgrading the value of the asset, but I think after people have overcome that fear, it [programmatic trading for TV] will be all over the place, and at the end of the day the ad community will push everyone to make video a video, no matter where it lives, and they will want to buy and compare with the same metrics across every screen,” he said.
Harnevo spoke to The Drum at Cannes Lions International Festival of Creativity.