Monday AM Briefing #73: A Short Essay on The Connected Future of Make-Goods & RSNs
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A Short Essay on The Connected Future of Make-Goods & RSNs
I love Pluto TV. I now turn it on daily to see if there's anything that works as background watching, or something to dive into before going to bed.
I've watched it enough that I've noticed two things:
Amazon Go ads may play two to three times in a row during ad breaks (meaning, no frequency caps), and
Make-good ads from CBS Sports Network college football broadcasts (NOTE: I'm not sure what the ad format is called, but it's effectively a video ad that runs in a screen overlay next to replay footage from a college football game.
The problem with #2 is that it's a poor user experience: it's an ad from a college football game that becomes a non-sequitur experience in the context of a movie or TV show.
It's a random, weird experience. I have seen multiple versions of random college football game footage and a car commercial companion ad.
They reflect the problem of make-goods in 2021, a problem that will grow as cord-cutting accelerates.
Make-goods solve for when the impressions for an ad have not reached a volume that met the pre-arranged acquired impressions - the mille of the Cost Per Mille (CPM) - and/or their intended demographic because of underperformance and/or error.
But, these ads especially reflect the challenges of make-goods for newer, digital ad formats like overlay videos ads.
EyeQ & Make-Goods within ViacomCBS
Pluto is owned by ViacomCBS, and ViacomCBS owns the CBS Sports Network, which broadcasts live college football games.
The connective tissue that serves ads to both is ViacomCBS's EyeQ, its "connected ecosystem of digital video offerings across all distribution outlets at all price points.
So the random local auto dealer ads I saw were make-goods on Pluto TV which had been served during college football broadcasts on CBS Sports Network via a MVPD (linear) or a vMVPD (digital), and delivered via EyeQ.
But for EyeQ and Pluto TV's 54MM Monthly Active Users (at least 30MM of whom are domestic U.S.), ViacomCBS would have a harder time with make-goods in the face of declining linear consumers in 2021.
Why This Matters to RSNs
I wrote last month in Friday Mailing #47: RSNs & Disaggregation:
Sports nostalgia content is “filler content” on network television....Disaggregated “filler content” isn’t a viable business model in part because local advertisers seem to prefer the [live] broadcast model and being associated with the sports team rather than the sports content.
So, neither MSG Networks nor any RSN is likely on the brink of being disaggregated.
But, all will need distribution going forward, and more importantly local advertisers both want and need RSNs to continue to have distribution because streaming does not offer a compelling alternative to local advertising (yet?).
Notably, I think the Pluto TV ad experience above - even if weird and subpar - suggests there is a compelling alternative to local advertising in streaming. Basically, it's a value proposition to advertisers of "we can make-good and find your target audience across '70M monthly full-episode viewers through a combination of free and pay outlets'".
This mirrors something I wrote about Amazon Advertising and sports deals back in March:
...both Amazon and NBCU can deliver a portfolio of options around context and targeting because that is what advertisers are increasingly asking for. That is where the complexity lies. The permutations of demands from the ad buyer, and the executions of the ad buyer’s plan, across both contextual and targeted advertising seem infinite. The ad buyer is ultimately deciding on whether they are confident the seller’s ad serving software will deliver optimal and efficient outcomes with their spend.
As for "filler content", it is fan-targeted, team-specific sports nostalgia content, which JohnWallStreet of Sportico wrote about last week:
It would be logical to assume if RSNs were programmed with better non-live content, viewership would be greater. While that may be true, it would not mean distributors would be any more likely to carry the network. That is because non-game programming doesn’t really hold much value in their eyes. They believe the game content they have is sufficient to keep the subscriber in the pay-TV bundle.Whether it is possible for an RSN to deliver ratings for content beyond pregame, postgame and live game inventory is up for debate.
"Filler content" doesn't scale like live broadcasts on RSNs - MSG Networks has “a healthy six-figure number” in New Jersey and Connecticut - and may not ever, even if it helps RSNs solve for make-goods at a smaller scale.
Conclusion
Sinclair Broadcasting Group spent much of their Q3 FY 2021 earnings call answering investor questions about the future of RSNs in linear and in streaming.The Pluto TV make-good ads I have been seeing imply the future for RSNs had may be worse than Sinclair may be letting on.
Advertising was 15% of gross revenues for its Local Sports division ($118MM) and the amortization of sports rights payments was 4.5x that revenue ($531MM).
Sinclair neither has the scale nor the non-live content for a make-good. There is an obvious weakness for which EyeQ or a similar offering could create value.
Does this mean ViacomCBS or another media company with similar cross-platform advertising solutions (e.g, Comcast) should buy Sinclair's RSNs?
Maybe?
But, the bigger point is that thinking about the pain point of non-live, "filler" content in sports goes hand-in-hand with thinking about the pain point of advertising on RSNs. Pluto TV is proving, in real-time, that there are better solutions for local advertisers if RSNs became part of the EyeQs, NBCUniversal Ones and Disney Selects of post-cord-cutting streaming distribution.
Must-Read Monday AM Articles
* Digiday wrote about the use of overlay ads in eSports
* Digiday's Kayleigh Barber wrote about how Sportsbooks are positioned to evolve from media companies' best ad buyers to biggest competitors.
* Steve Anderson asked "What Will Save the RSN?" over at The Streamable.
Emerging "Metaverse"-type convergence strategies
* Andrew Webster wrote at The Verge, the Metaverse means "In a decade, entertainment will try to be everything" and current projects "will likely grow to absurd proportions".
* Take-Two CEO Strauss Zelnick offered his skeptical, "if past is precedent" thoughts on the Metaverse to GamesBeat.
* Meta's Andrew Bosworth shed more light on Meta's Metaverse plans with The Verge.
* Daring Fireball's John Gruber had a good post on why Minecraft is the Metaverse.
* TechCrunch's Catherine Henry asked, "Is China building the metaverse?"
* Epic Games announced that its work to bring video game mega-title Fortnite to the Chinese market is shutting down.
Aggregator 2.0
* Mark Gurman of Bloomberg broke down why Apple's App Store is a "roadblock" to Netflix achieving its gaming vision.
* Deloitte found that while digital entertainment consumption increased during the pandemic, Boomers and Gen X watch TV shows or movies at home while Gen Z plays video games and listens to music.
* RTL Deutschland launched its own version of an "aggregator 2.0" bundle with Deutsche Telekom and audio streamer Deezer.
Sports & Streaming
* Front Office Sports reported Disney has reached $100MM in ad sales for its NHL Broadcasts.
Creative Talent & Transparency in Streaming
* Kevin Mayer and Tom Staggs, in parternship with Blackstone, acquired Moonbug Entertainment for $3B.
* Lucas Shaw of Bloomberg wrote about the growing impact of these valuations on Hollywood.
* The 23-year-old "social phenom" and TikToker Larray signed with Facebook to produce and distribute Something About Larray, in which over the course of 11 episodes renovate his grandmother’s home, where she has resided for 60 years
Original Content & “Genre Wars”
* Netflix's success with original series “Squid Game” has drawn new attention in South Korea to payments to creators and other thorny issues, notably taxation of earnings and network access fees.
* Apptopia tracked downloads on Android and iOS devices and from the first quarter through the third, it found that HBO Max amassed 38 million total downloads in the U.S., putting it ahead of Disney+ with 29 million and Netflix with 28 million.
Comcast’s & ViacomCBS’s Struggles in Streaming
* N/A this week
AVOD & Connected TV Marketplace
* How YouTube sidestepped Apple's Anti-Tracking Transparency
* Amazon confirmed at the StreamTV World Conference is testing out a customer data-sharing agreement with at least one streaming service, including Discovery+.
* The IAB's Fall Impact Study found that budgets continue to shift to digital, with traditional media projected to lose 6% in 2022, mostly from linear TV.
Other
* Evidence in a Department of Justice lawsuit has raised uncomfortable questions about how Google identified header bidding as an “existential threat” and detail how AMP was used as a tool to impede header bidding.
* Rolling Stone interviewed the founders of the Billion-dollar NFT ecosystem Bored Ape Yacht Club (NOTE: whose clubhouse is on East 3rd street and is... grungy).
* The New York Times interviewed Neopets players who continue to play the online game 22 years after its release