Why local advertisers are getting lost in TV's mad streaming race
Three of America’s largest local TV broadcasters are moving into streaming, but they may have a hard time getting a certain class of advertisers to follow them online.
Sinclair, Nexstar and Cox are all at different development stages with their over-the-top (OTT) products. Local advertisers who’ve long bought inventory across these broadcasters’ affiliate stations will naturally want to reach a growing set of cord-cutters, but they face scarce supply and opaque campaign reporting in this new age of TV.
According to eMarketer, more than 180 million people in the US are projected to use an OTT service by the end of 2019. However, ad-free services such as Netflix and Amazon Prime Video are driving much of that growth.
More people are watching OTT, but that doesn’t mean advertisers can reach them.
“The AVOD (ad-supported video on demand) supply that's there comes at a hyper-premium cost, and there isn't necessarily a lot there that hasn't been directly sold,” said Tony Katsur, senior vice-president of digital strategy and operations at Nexstar.
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“When you take something like that to a national level, where there already is a tremendous amount of scarcity, and you then localize it ... that challenge is magnified ... because you have even greater scarcity [when] you geo-fence the buy.”
Nexstar is currently in OTT test-mode, operating one always-on channel for its San Francisco affiliate, Kron On TV, that will feature unique streaming content as well as a live on-air feed.
Katsur said Nexstar should eventually offer something similar in its other markets. This is likely a needed move given that AT&T has recently blacked out about 120 Nexstar stations – including the San Francisco affiliate – as both sides argue over carriage rates in a world where once-reliable cable subscribers are fleeing toward alternative OTT services.
Sinclair – Nexstar’s biggest competitor – has also been hit by some AT&T blackouts that span across its TV portfolio to include its OTT service, DirecTV Now. Sinclair also has Stirr, a local-focused OTT platform it launched in January. Sinclair announced last week the service has hit one million downloads.
Cox has Contour, an OTT service launched in 2016 that is licenses out through Comcast Xfinity’s X1 platform. As of May 2018, Contour had 1 million customers. Cox has not given an update on that number.
Sinclair and Cox are also apart of a joint venture in NewsON, a local news streaming service.
That’s all just owned-and-operated OTT; each broadcaster also populates myriad AVODs and virtual MVPDs (multichannel video programming distributors) with their content. Suffice it to say, consumers have options.
Local advertisers may not have the same level of choice, especially since ad-supported OTT services tend to prioritize upfront direct buys with large advertisers. Pluto, which once leaned on programmatic sales, has culled its supply partners and gone through a self-described successful upfront season – now that is has the backing of Viacom’s direct sales team.
Back of the line
Programmatic selling is key for most broadcasters entering OTT. Katsur estimated that Nexstar onboards upward of a dozen supply partners a month, which he said helps “extend our clients' reach” into markets where Nexstar doesn’t have affiliates.
“There's that supply scarcity at a national level, and it's magnified at a local level,” said Katsur. “You really need diversity of media supply to ensure your customers can reach their constituents at local markets.”
A lot of advertisers will equate programmatically available inventory with remnant inventory, but that's largely dependent on the supplier’s integration within a publisher’s ad stack.
Gamut, Cox’s advertising company, will take on a publisher’s local inventory and sell that essentially right at the beginning of the inventory waterfall.
“Because OTT is still very scarce and there's still a finite pool of inventory, programmatic is really not the best place to execute local advertising,” said Soo Jin Oh, senior vice-president of client strategy and solutions at Gamut. “Instead, what we've done is... directly bought within these publishers’ ad servers.”
Katsur said Nexstar Digital, the network’s ad unit built after it acquired LKQD, sets up varying points within a publisher’s ad server, giving advertisers the opportunity to buy anything from sponsorships to impression-based guarantees.
“If you want to do an opportunistic audience-driven buy, then yeah – maybe you're more down at the remnant level,” said Katsur.
No cherry picking
Buying programmatically does come at the cost of transparency, however. Publishers can provide granular campaign reporting on their owned-and-operated OTT services, but that goes out the window when using other services.
“We can only show the channel that something aired on,” said Katsur. “The challenge is not a technical one. The challenge is a business issue where most suppliers don't want you to report on a program level, because what they're trying to avoid is program-level cherry picking.”
This all goes back to scarcity. The limited premium OTT supply means local advertisers buying programmatically get the short end of the stick.
“I could report on program specific performance today, but a lot of it is contractually prohibited,” Katsur admitted.
Sinclair recently partnered with Comscore to bolster Stirr’s campaign reporting service, something Jin Oh said it a must-have.
“It's become a table stakes thing for everyone to have reporting, but when you really look at what's on the report, there's a divide in quality,” she said. “The good thing is the people who have owned-and-operated [services] have access to that data, so they can report even down to the show-level for their O&O.
"It's when it's outside that these things get compromised.”
There’s also the simple fact of educating the marketplace on the abundance of streaming services at play.
“That's part of our job,” said Katsur. “If they understood all of this, what would they need us for?”