Intelligence Report: Video 2015

From 1998 to 2013 cable prices rose 231%. However the underlying innovation has not kept pace. Like sharks sensing chum, a host of well-funded companies introduced video offerings beginning with YouTube in 2005. These platforms have opted for a different path, “over-the-top” of traditional TV and cable networks. While total video viewership sets new records, viewership on Viacom channels, including MTV and Nickelodeon, are off a staggering 34% year on year, suggesting that when consumers have access to “great,” “good” no longer works. Challenges for these channels underscores the demographic shift—millennials are watching half the hours of linear TV versus their 50+ peers. Live television is not immune—the 2015 Oscars ratings were down 17% year on year, however advertising rates managed to increase 5.6%. Cord-cutters are young and wealthy, extremely attractive to brand advertisers as nearly half have household incomes of $75k+. However the majority of new “over the top” TV offerings favor subscription models with limited options for brands to get in front of these elusive eyeballs. Enter social media. With an 80 billion dollar TV advertising pie that is just too big to ignore, there has been torrid innovation in online video advertising, targeting capabilities and formats led by YouTube, Facebook and smaller social counterparts Instagram, Twitter, Snapchat, and Meerkat. Digital video spend was up 52% in 2014. Unlike social, mobile and search, the brave new world of ad supported video looks to be a duopoly—Google’s YouTube and Facebook video. The celebrity deathmatch pits Youtube’s push and pull mix of organic and paid against Facebook’s shove strategy that leverages the ability to interrupt, and reach the largest community assembled in history. This dynamic will likely result in product innovation and pricing pressure that benefits advertisers. As advertisers ramp spend, 46% cite content quality as their biggest challenge to online video market