What is CTV’s Real Value Proposition to Consumers?

History informs the explosion of CTV

By Tom Wolfe

In 2008, Roku sold its first player; Samsung, LG, and others had unveiled Smart TVs. Consumers didn’t yet know what to make of them. But the revolution had been launched.

Technology and Consumer Consumption feed off each other. If CTV technology hadn’t emerged, perhaps we would be perfectly happy with the traditional broadcast model. The 1982 finale of M*A*S*H drew 105.97 million viewers; the 2020 Super Bowl drew 99.9 million viewers. We have the potential to simply do what others tell us to do, with the proper draw (even today – see: The Mandalorian, episodes released weekly).

If this is the case, why has Connected TV succeeded? What went wrong in the traditional world, and what real value does Connected TV provide to a viewer?

In the beginning….

Broadcast TV offered great value: free video content. You need only buy a TV set. They believed that three networks, plus a couple of local stations and PBS, would offer more than enough content. And they, along with the US government, decided which content you got to watch.

While they were controlling your TV set, the Greatest Generation sat down to watch Ozzie & Harriet, went to bed, and begat Jimi, Janis and the Boomers. As they matured, they needed to: a) satisfy their revolutionary instincts; and, b) get jobs. Thus, Jimi and Janis begat CNN, ESPN, HBO, and MTV – each uniquely revolutionary.

One Giant Leap

CNN and ESPN appealed to the loyalty of the news and sports fan, respectively. HBO convinced people to pay for a TV network. Perhaps most critically, MTV accessed the future, by targeting the young. Promotional clips were not new; everyone from Tony Bennett to The Beatles had created videos, as early as 1956. The founders of MTV knew: young people love music. Centralize access, and they’ll watch. And advertisers, who love young people, will pay.

Simultaneously, Ralph Roberts, John Malone, and others introduced a TV solution to households that had trouble accessing broadcast signals via antenna. They laid cable throughout America, to peaks of mountains, and the peaks of apartment buildings.

These pioneers in distribution and programming brought a new value proposition to consumers: diversity of content. If you didn’t like what the Broadcasters had to offer, the cable world offered you a choice. For a few dollars.

Broadcast technology emerged in the late 1940s, peaked in the early-mid 1980s. Cable’s decisive, shorter run concluded in the early 2000s. Why did it end?

The Revolution will be… distributed over Internet Protocol

Internet Protocol on TV rose not solely due to its technological innovation, but to three factors impacting the traditional providers: 1) big money; 2) big operations; 3) constrained foresight.

Big Money: it’s complicated. First: since the broadcasters accessed public airwaves to transmit their signals, the broadcasters insisted cable operators “must carry” their services. Second: as cable and broadcast networks merged, they insisted (with a hand from the FCC), “if you want our consent to retransmit our signal, you must now pay me for the broadcasters we had previously forced you to carry.” Third: the costs escalated. Famously, ESPN, on average, cost each subscriber $5 per month. In retrospect, looking at the entertainment cost discussion in each household, does that seem sustainable? Smart people in the business knew it wasn’t. But they all had goals to hit. The pressure is understandable.

Big Operations: The entertainment services provide amazing content, despite obstacles – producing, directing, writing, acting, personalities, weather, electricity, and more can impact a production. The quality of content was evolving even before streaming TV became mainstream. In the 1990s, hundreds of cable and satellite operators each ran their operations slightly differently. Thus, the programming delivery infrastructure grew complex. Certainly, the operations consolidated over time… to a coax solution. By the time streaming emerged, the expertise of their operations teams simply did not include digital delivery.

By the time the distributors and programmers prioritized digital content delivery, the infrastructure supporting their other revenue source – advertising – was outdated, as their partners struggled to adjust to a world in which viewers do not fit into Dayparts, and advertisers do not always purchase pod placements.

Constrained Foresight: when the Money and Operations are Big, the roadmap for innovative product deployments can get small. Many artists in the world recognized the streaming trend. But the business leaders did not properly plan for the future. Some dipped their toes. NBCU launched a subscription CTV service called SeeSo, which successfully signed up several hundred thousand subscribers. However, SeeSo compared unfavorably with traditional numbers, so NBCU shuttered it. Three years later, with the notable launch of Disney+, NBCU had no choice but to launch Peacock. Meanwhile, Cord Cutting accelerated, and drafting off Roku’s Q3 2020 earnings report, the total active accounts of Roku and Amazon now exceeds those of every cable operator combined.

How do the history and factors inform the real value of OTT to the consumer?

Each step in the evolution brought great value to the viewing community:

• Broadcast TV brought Free Video Content to consumers.

• Cable TV brought Content Diversity to consumers.

• OTT brings Content Control to consumers.

While Connected TV brings value in expanding the content palate, the real value comes in the control the platforms provide to their users. Streaming gives consumers the ability to choose and access any service, any time, with easy billing, flexibility, and more. If they want to get ESPN from Hulu – they can. Or they can get it from SlingTV. Or YouTubeTV. They don’t have to lay wires in their homes. They don’t need to disrupt their work days with four-hour service windows. They can swap services easily. Small money, small operations.

The Endgame

These mechanisms for control are revolutionary in TV consumption. So…what’s next?

In the near term, we should see a natural extension of this control: imagine you can shift one consolidated programming budget to different services each month. Consumers pay their CTV platforms $50 each month, and can subscribe to Netflix, Showtime, and Great Courses one month, then change to Disney+, HBO Max, and CBS All Access the next – without having to sign up or cancel with each service. It will be managed in a simple dashboard.

While this scenario raises many challenges, the Consumer won’t be denied. Plan for it now, and try to anticipate whatever follows.

Next Time…

Thank you for reading! In our next column, we’ll explore the relationship between Connected TV and Jesus Christ.

Tom Wolfe is not the author of The Right Stuff, The Electric Kool-Aid Acid Test, or Bonfire of the Vanities, although technically, he is a nationally-recognized, award-winning poet. He is the founder and principal of Rust Interactive, a consultancy specializing in helping companies navigate the booming Connected TV ecosystem and opportunity.