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SMW '16: Roku Sees Huge Changes Coming to OTT and Advertising
As broadcasters launch OTT apps, they're attracting massive audiences and changing the economics of streaming. Look for targeted ad tech to come to OTT.

Trends are now converging that will change not only how we watch television, but how the ad community operates. Delivering the opening day keynote address at Streaming Media West 2016, Steve Shannon, general manager of content and services for Roku, explained how mainstream networks have taken to over-the-top (OTT) platforms in the past year. Currently, the only one that offers viewing without pay TV authentication is CW, but Shannon believes other broadcasters will follow suit.

"When that changes…when these broadcasters come in with free ad-supported content, ad viewing will skyrocket on the internet," Shannon said. "It's exciting, seeing how progressive some of these old-line companies are getting."

Ad-supported viewing is the fastest growing segment of the Roku platform. While the first OTT apps were largely for niche subscription services like Acorn, broadcast networks have completely changed the experience, which is a win for streaming viewers.

"Consumers like free stuff, and we can give them free content," Shannon said. At the moment, most broadcast content is locked behind authentication gates, but may not be for long. "Hopefully, all the broadcasters will make their video available for free." Those programs are on the air for free, so why not OTT, he wondered.

The OTT ad world hasn't caught up with online viewing yet, but it will, and it will completely change the industry. Expect ad loads to drop—by half to two-thirds.

"We have to get rid of the five commercial block," Shannon said. Most commercials aren't relevant to the viewer. "The beauty of the internet is we can get smarter about who we're advertising to." With viewer targeting technology, advertisers can deliver only relevant viewers and command higher CPMs. Broadcasters will be able to get the same revenues with far fewer ads.

"This technology has been heavily, heavily refined on the internet," Shannon said. "Television is still just carpet-bombing."

Shannon also looked at viewing trends and predicted that watching one full series at a time and then moving to another, much like how people read books, will become the new normal. As the quality of TV shows improves, movies will become less important. Movies will be short stories, compared to TV shows as books. The creative shackles are off the medium of TV, he said, and viewing is shifting.

"All TV eventually will be streamed," Shannon said. "Some may view it as hyperbole; we view it as the way the world will be."

The majority of broadcast viewing is still linear, though its share is declining. Linear streaming, on the other hand, is on the rise. Massive bundles will give way to multiple lower-priced subscriptions, Shannon said. The single-service set-top box will also go away as consumers demand lower-priced devices with simpler user interfaces and thriving app marketplaces. Roku and Google are the biggest platforms for partnership, he noted.

Shannon is a familiar face to SMW attendees, as he also delivered a keynote address in 2012. At the time, Roku offered over 600 channels; now it's near 4,000. The TV world is changing, and currently the most dynamic area is advertising.

"This year digital ad spend will catch up with the traditional ad market," Shannon said. Expect big changes to come.