What’s new within the video world. How the TV and creative scenario is changing after the pandemic, and how M&A, and post merger integration represents an accelerating factor of such change.
By Alessandra Silvestri, Global PMI Partners
New business models are changing the world of broadcasting. TV and video consumption by audiences are also leading to industry changes. M&A and PMI in the manifold advertising landscape (Ex: CTV and measurement tools) appear as a warning sign of transformation, and act as an accelerator. Southern Europe, a place where traditionally linear TV audience dominates, is visibly impacted.
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The video and TV consumption model in the world is undergoing a deep change, which may be reverberating on the creative industry at a larger scale, redefining languages, formats, narratives, and content generation – and, consequently, the relationship among the industry players.
Technology diffusion and new, more powerful audience measuring tools had already transformed this medium, leading to a wide restyling of the linkage among the subjects involved in advertising proposals, its buying dynamics, and the process advertising and media industry use when they try to shape targeted appealing experiences and find touchpoints allowing the consumers to “meet” their favorite brands.
The evolutionary trend seems imposed by the consumer himself because a definitive acceleration has been transmitted during 2020. A crucial year characterized by the worldwide spread of the Covid-19 pandemic, a catastrophe that intensified the speed and development of the digital side of everything, but compelled entire industries to review and reshape their business model and find solutions they wouldn’t ever dream to adopt in the short term.
It’s what happened to TV advertising. TV is the traditionally iconic and preferred medium in the less digitalized Southern European countries, for instance. TV advertising traditionally appears in the so-called “linear TV”, which broadcasts scheduled programs in well-defined hours of the day (like daytime or primetime) and whose advertising broadcast meets, for its part, specific targets, lasts a specific amount of time, and has therefore defined costs according to a more or less predictable audience model. Commercial TVs, with its advertising-driven model, has long been the typical representative of such a paradigm. This consolidated model in Europe is now trapped in a sort of entangled, labyrinthine “messy middle”, just to quote the Digital marketing Newsletter issued by Google, “Think”. A proliferation of scheduling models and proposals has taken place in commercial linear TV audiences, to maintain by any means the audience base against the traditional competitors, still surviving but being no longer able to track and measure completely its audience and reach with traditional techniques. At the same time, audiences experienced the advent of IPTVs, (Internet Protocol TVs), and subsequently, online platforms customizing content, releasing the viewer from the rigid or semi-rigid scheduling and offering an alternative delivery, often needing a subscription, from OTT (Over- the -Top) to Video-on-Demand services (VOD or SVoD, subscription-based video on demand) .
Such services are in most cases individual -or personalized- streaming services on the Internet. This means for instance that time spent by former traditional linear TV audiences became time dedicated to YouTube and alike channels, or platforms like Netflix, or Disney Channel, the latter customizing content as much as possible and giving rise to “advanced TV” proposals. OTT, and “social TV”, in particular, disseminated consumer attention in a huge number of offers, more difficult to be captured by measuring tools.
This change in consumers’ behavior set the bar higher for the advertising industry. It gave further inspiration to their players to the use of TV and video for innovative advertising options. And gave the advertisers more choices to place an ad. The task of capturing the once steady, now more volatile audiences suddenly turned to something a bit more complex, and the goal of creating an adequate and cost-effective reach even more elusive.
Especially during the pandemic lockdowns, industry leaders say, the definitions of “what is exactly VOD” (VOD with ads, or else excluding ads in premium formulas, or guided by ads) and “what is TV”, both on the consumer experience side, and the advertising industry side, began to show blurred borders. Going deeper:
- The diffusion of new measurement tools and multi-channel platforms on each of the numerous sides (sell side, buy side, broadcast, clients, agencies), has multiplied visions/practices on the same subject.
- The fact of facing regulatory problems connected to the access to some typology of detailed data – those covered by European GDPR (privacy law), as an example, made in some cases the data capturing activity more difficult
- The increased use of more technically complex targeting techniques (Ex: mixing traditional TV panel data with online probabilistic data sources) augmented the data volume and the necessary analysis
This situation generated a sort of “confusion” within the decisions makers about the management of TV and video advertising budgets of clients of the media industry. And this “confusion”, of course, offered new challenges to an already deeply challenged industry.
But is an entropic situation so negative in a creative environment, even in a data-driven industry like media advertising and content? Not so much, if it generates a more dynamic ecosystem and differentiates strategic models thus supporting the clients’ businesses during the Covid restart period… and, at the end of the day, supporting the restart phase of future economic growth. M&A helped and became a kind of backbone for this transformative scenario. Post Merger Integration, in this case, can become the right time to boost transformation and better define next strategic models.
Let’s look at Southern Europe, a small but interesting observation post. Changes and attempts of combination happened, for instance, both to the measurement tools pools and CTV. Looking at the measurement tools, in Italy, Audiweb and Audi- press were two entities trying to merge to create a local “Joint Industry Committee”. The result should have been a kind of joint platform for integrated audience measurement and research of both media. The new legal entity, named “Audicomm”, would create real metrics which would capture a “total audience” A merger momentarily put on hold on May, 2021. A similar attempt happened to the sell-side platforms of what has been defined as a once very niche, now much more diffused phenomenon like CTV, enjoying the kind of mostly display-type, programmatic, or OTT (Over-the-Top) ads, often visible on TV streaming platforms, usually excluding mobile and laptop devices.
This time, with very different outcomes, because it happened at a much larger scale.
CTV advertising belongs to the same ad family of display Video Ads, a kind of content that is time-bound and more costly than “ordinary” digital PPC advertising, but decreasing its cost if sold on a biddable base than the kind of advertising widely labelled as SEA (Search, SEO/SEM, Social networks)
We are referring to programmatic advertising as a niche market because it’s a kind of advertising pushed by a high level of automation -AI is often used to place ads on the right websites or TV-, it’s mainly “TV only” (mostly streamed TV) but, when it happens, the reach is really optimized and the targeting perfectly tailor-made if properly “geofenced” and parametrized.
This would represent the dream of digital advertising, a perfect target and a perfect reach. But the dark sides of the moon seem to be more than a single one in this case because most OTT transactions are private – not auction-based, and therefore not open to all players within that market- and deals are often “disintermediated” and made privately by publishers themselves. A 152 Billion dollars market in the US. Moreover, most CTV SSP (Sell-side-Platforms) are founded, developed, and owned by programmers, device makers, and big TV or broadcasting networks. They are not independent market players with scalable offers.
As a consequence, most premium inventory, especially- but not only- in the biggest markets like US, is directly owned by large players like, for example, Roku Channel, Warner, Disney +, Hulu, and is often not entirely accessible to independent CTV market players. Giants like Amazon, or Google…. of course, they use their own technology.
On DSP’s (Demand Side Platform) side, the TV networks or streaming channels have often bought the most famous DSPs themselves, from the hands of independent tech firms or start-ups, or media & advertising agencies. They created a vertical integration which is segregating large inventory portions on the demand side, and sometimes offering DSPs with flexible models as customizable SaaS to end users and/or advanced users, who can even apply their own algorithm replacing the existing one. This means dramatically reducing the price of the service, but favouring a sort of high-tech elite and oligopolistic situation.
CTV sell side platforms (SSPs) exist in Europe, too, and their strategy is often a worldwide one, connected to the American market. But on a smaller scale and in a more traditional market, what makes their disruptive power easier to display. Because SSPs have bravely accepted the task of changing the rules of the game.
An example? Magnite, a US based SSP (LA) which is sharing a slice of this crowded inventory market on the sell side together with Freewheel, is itself the result of a merger of two former entities, Rubicon and Telaria. Magnite is now acquiring SpotX, a platform belonging to RTL Group, a European TV Network whose owners were a famous german publisher and broadcaster, Bertelsmann, Groupe Bruxelles Lambert, a belgian holding company having in Portfolio percentages of shared capital of companies in very different industries like Adidas, Pernod Ricard, Total and Burberry, and Pearson Group, an international publisher based in UK. This union was beseeched by many advertising buyers and sellers, just to find a scalable and independent alternative to a business model which sounded too verticalized and too much as an inventory “segregation” scenario.
The objective of the ad tech firm is becoming the worldwide largest independent SSP and video inventory source on the market, extending the support to all kinds of devices (Mobile, laptop, etc.) and diverse formats (video, audio, display, etc). Becoming a real omnichannel SSP. This means being included in the real media revolution of the moment, together with the so-called “cookie apocalypse” and the “in-housing”, a phaenomenon linked to the insourcing of core competences -once active exclusively in media departments, startups or agencies- by top spenders. Omnichannel strategy means also powering technological hubs in strategic places in the world, like the one Magnite is building in Singapore, just to increase inventory monetization in APAC region, including Australia, a continent where CTV is robustly growing.
Coming back to SpotX, this means also boosting SpotX’s strategy of convergence of CTV and online video towards a broader and broader format and media inclusion. For all these reasons, the value of the deal has been considered much higher -4 times- than the previous deal. It happened not so long ago, indeed, when RTL activated the acquisition of SpotX. The end transaction price has been fixed as 640 Mio $ cash plus 12.374.315 Magnite stock options, the full value being 1,14 billion $ , according to last the Stock Exchange closing on April 29th. Nasdaq backed such a diversification strategy thanks to the increase of the stock value.
After facing the regulatory facet of this deal, Magnite will try to move the most video advertising budget to auction-based and algorithm-driven programmatic buying extending the market to all formats and to an easier reach. A democratizing move, which is, in turn, supporting the fragmentation of audiences, the change in consumption trends, and content typology.
How will the situation change for Southern Europe, though? Will Traditional linear TV audiences face the seismic shift (using the words of Magnite’s CEO) Asian and Australian TV audiences are already experiencing leading to a future scenario where big spenders are going to migrate money to CTV ensuring independent platforms’ growth ?
It may be happening slowly, but something transformative is already happening in the TV panorama, because even in the more traditional Southern Europe young audiences (millennials, and Z generation) are choosing content more self-consciously and autonomously, driving the choice of on demand subscription-based platforms and on-demand content and personalized choice – at chosen daytime or prime time. Even publicly-owned linear state TVs like RAI in Italy has developed TV apps for laptops and mobile and on-demand offers. And, moreover, the demand for digital advertising has, for the first year (2020), overtaken traditional advertising demand – on top, press and linear TV.
Linear vision (including DTT or cable and satellite TV) needed several channels with a “linear” choice based on the number of the channels. The ultimate way to discover a platform, instead, will be an algorithm-based choice, originating from the viewer’s desires.
Such evolution may be furtherly accelerated in the whole world by the mega- combination in this market, happening… in the USA. It’s, as a bright example, the spin-off of the Warner Channels from AT&T, which will be then integrated and combined through a merge with Discovery Inc. Competition will leave the place to cooperation and extend the synergies connected to the on-demand offer.
The agreement, freshly announced, is not so distant in time from the recent acquisition of Time Warner Inc. by AT&T (2018), a highly criticized deal that overcame several regulatory hurdles. WSJ has defined AT&T after the deal:” The world’s most indebted non-financial company”.
The media business of AT&T has been valued at around $50 billion -debt included- and its shareholders would hold a robust stake in the newco.
What would the combined company mean for the media and advertising market? Both companies own cable channels and pay TVs, whose subscriptions have been heavily replaced during the pandemic by subscriptions to competing on-demand streaming services, like Netflix or Disney+. Such trend, already set by Discovery Inc., of moving its most famous shows into the streaming service Discovery +, and the further opening of new vertical streaming services, will further increase investments in this industry, multiplying devices and formats. And, obviously, advertising and creative industry will follow, officially opening “the era of omnichannel advertising”, whose buying aims at an experience exceeding a single-target, single-platform proposal. The post merger integration phase of such epochal change may require consultancy and training, so that the human and organizatory sides of the transformation moment are successfully settled
The traditional linear TV with “Familiar ads” may not survive so long to this transformation.
|Alessandra Stivestri, Associate|
|Global PMI Partners|
About the author
Alessandra Silvestri is an Associate at Global PMI Partners in Italy, focusing as HR & Culture expert and Business Process Integration. She has experience in M&A projects in Europe (Italy, Germany, Europe), with specific experience in: Pharma-Biotech, Machinery, Media & Advertising, being in charge of transformation projects.
Global PMI Partners, an M&A integration consulting firm that helps mid-market companies around the world by delivering exceptional consistency, speed, and customized execution on the complex operational, technical and cultural issues that are so critical to M&A success.