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What’s Next for Digital TV?

Video and TV advertising continue to shift in ways that bring them closer together and it’s clear that the overlap, innovation and transformation we’re seeing will continue. Two industry developments that emerged in 2017 further underline the changing nature of today’s TV landscape: the growing success of Facebook’s TV-like “Watch” service and the likelihood that Amazon will create an ad-supported video platform to accompany its popular Prime Video subscription product. These two stories point to three themes helping shape today’s media and advertising environment:

Audience size matters
Whether we’re talking about Facebook’s move into TV, or Amazon’s possible expansion into ad-supported streaming video, both moves reflect a similar business strategy: size and scale matter. TV ad models were always built on an assumption that huge audiences would help entice advertisers and ensure high ad rates. Increasingly many digital players are following this same approach as they work to build the largest possible audience of viewers. For Amazon, a “free” streaming tier could bring in new customers, giving the company more leverage to negotiate with advertisers. Meanwhile Facebook, the company with one of the biggest consumer audiences in the world, is hoping to leverage its huge reach to entice advertisers with a TV-like media experience.

TV ad dollars are getting more important
The second theme related to the news from Facebook and Amazon is the growing importance of TV advertising to today’s rapidly-evolving media companies. Although the budgets for video and TV once existed in separate silos, today they are increasingly overlapping as tech-driven digital platforms look to lure TV advertisers to buy online. Just look at the example of Facebook and YouTube, two companies that are staking the future of their business on trying to mimic the experience of TV in the digital space. YouTube has made no secret of its interest in capturing more TV ad dollars or in building a TV-like viewing service of its own. And Facebook is reporting record revenue thanks to its shift toward more TV-like ad experiences. The company reported 3Q 2017 earnings of more than $10 billion.

 Competition is heating up
Amazon and Facebook aren’t the only two companies trying to aggressively expand their TV offerings and audiences in the digital realm. Increasingly, other players are trying to consolidate their content offerings and align with the right media allies to ensure they have the resources to compete in this rapidly-evolving digital TV world. Just consider Disney’s recent megamerger with Fox, or the impending AT&T merger with Time Warner (a move that is currently held up in legal limbo with the US Justice Department). This is to say nothing of the numerous other popular digital services like Netflix and Hulu, among others, which could get more active with ad-supported online TV offerings in the near future.

Today’s TV and video experiences are closer together than ever before, both for advertisers and for viewers. But as a growing number of business moves by companies like Facebook, Amazon, YouTube, Disney and others suggest, tomorrow’s most successful media companies will need to ensure they have the proper scale, content and ad offerings in order to compete in this rapidly changing environment.