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  • May 19, 2022
  • By Bob Wain Software Portfolio Manager, MediaKind
  • Blog

Monetization in the Streaming Era: Creating a Win-Win Relationship

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Monetization methods within video streaming have remained unnecessarily binary for too long, with pay TV and streaming providers relying solely on linear advertising and monthly subscriptions. It’s true, the technology underpinning these monetization strategies has developed in leaps and bounds in recent years, making subscriptions more consumer-friendly and flexible, and ads more personalized to the viewer. However, the rapid acceleration of streaming technology has ushered in a new way of thinking about how media firms commercialize their content.

Particularly in light of the widespread adoption of direct-to-consumer (D2C) streaming services, it’s time media companies refreshed their approach to monetization and utilized the tools and technologies readily available today. New hybrid business models are emerging involving a wide array or monetization tactics, including subscription, transaction, fan engagement, and advertising.

Understanding Existing Industry Challenges

According to Kantar, advertising-based streaming services dominate the market, with the top four AVOD providers (Hulu, Peacock, Paramount+, and Tubi) raking in $3.5 billion in advertising income in 2021. Despite this, the television advertising market is in upheaval as broadcasters and TV operators weigh the most successful ad insertion methods for linear and non-linear viewing experiences. Dynamic new advertising technologies promise to improve ad targeting and enhance ROI for specific use cases.

An ongoing debate amongst TV operators lies in the server-side ad insertion (SSAI) vs. client-side ad insertion (CSAI) decision-making process. Both strategies have advantages and disadvantages depending on how the content is supplied and to which platform. Although SSAI is an excellent contender for scaling content to many users, it may have difficulties offering highly focused, low-latency live streaming. The capacity of CSAI to provide interactive content such as gaming and fantasy league services, various camera angles, and live statistics—qualities that have significant advantages in the sports and esports sector—is a huge opportunity. Because each model addresses a different difficulty and provides unique solutions, the simple approach is to use both SSAI and CSAI in tandem. Budget constraints, however, may stand in the way.

Don’t Underestimate Data!

Depending on the scenario, commercial advertising models for event-based programming can vary enormously. For example, an esports league may incorporate pre-game and post-game content tailored towards super fans interested in a wide range of content, such as behind-the-scenes footage of their favorite teams or enabling social media interactions with other gamers. This type of access appeals to die-hard fans, and content owners can simply increase the value of their content by integrating, personalizing, and monetizing adverts.

Data-driven analytics drives substantial innovation in this field, allowing advertisers to better understand who their target audience is, their watching history and habits, and which advertising they respond to best. This means advertisers can target specific messages or flip between different ad placements depending on the game's schedule. Traditional linear advertising does not allow for this level of personalization and flexibility, instead concentrating on push mechanisms that disseminate content to a large audience. However, this is no longer a viable strategy of generating consistent sales - advertisers can no longer afford to cross their fingers and hope their message reaches the right people.

Monetizing Fans Through Interactivity

A new approach to advertising can also be seen in companion content that aids gamification. Major streaming services are experimenting heavily in interactive content and investing large amounts into gaming divisions to bolster their existing propositions. Just this year, we’ve seen blow-out acquisitions of gaming companies from the likes of Microsoft, Sony, and even the Saudi Arabian government. By including more gaming and interactive opportunities within streaming services, content owners can gain considerably more insights into their audience and provide far more active and engaging experiences.

Live event programming has numerous possibilities, particularly in sports and esports. Streaming services' recent sports rights investments could bring about the introduction of features like live betting integration and integrated athlete stats. Another potential route is to sell portions of a game or event individually through the app, particularly as younger fans increasingly opt for short-form highlights and catch-up content over the full live game. A D2C app could sell the final quarter of an NBA playoff game or the final innings of the World Series.

Capitalizing on Internet Delivery

D2C streaming services bring significant monetization potential to content owners and TV operators beyond subscriptions and ads, yet are rarely utilized. Service providers can build additional revenue streams into their service through commerce, including brand merchandizing, ticketing, in-app gaming purchases, and betting. While these features naturally align with many sports OTT D2C platforms, of the 40 sports rightsholders analyzed in MediaKind’s 2021 Sports D2C Forecast, just 5% provided merchandize options. Only 8% had deployed advertising services, and none of the sports rightsholders reported offering an integrated betting service yet.

Some prominent players are beginning to capitalize on internet delivery to expand their revenue streams. Netflix, for example, has expanded its online retail and merchandising business by launching Netflix Store, featuring apparel, toys, games, and other lifestyle products. However, the limited use of these fan engagement features among other services may be because they’re still in their infancy, and content owners prioritize delivering the best content experience and user interface. Nonetheless, the opportunities to prove the monetizable worth of D2C services are ripe and bring real-life, tangible rewards.

[Editor's note: This is a contributed article from MediaKind. Streaming Media accepts vendor bylines based solely on their value to our readers.]

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