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Future of TV Briefing: Disney+ ad plan underscores the emergence of streaming’s dual-revenue stream



Future of TV Briefing: Disney+ ad plan underscores the emergence of streaming’s dual-revenue stream

This week’s Future of TV Briefing looks at how subscriptions plus advertising have become the streaming equivalent to traditional TV’s dual-revenue model of advertising plus carriage fees.

Plus ads

The key hits:

  • Disney will join Discovery, NBCUniversal, Paramount and WarnerMedia in adding an ad-supported tier to its flagship streaming service.
  • Hulu and Discovery+ have shown that lower-priced, ad-supported tiers can generate more revenue per user than higher-priced, ad-free options.
  • The addition of an ad-supported tier can help Disney to capitalize on a supply-starved ad market and to address the streaming market’s subscriber growth slowdown.

Traditional TV’s dual-revenue stream has posed a dilemma for TV network owners shifting their businesses to streaming. But streaming has been developing its own dual-revenue stream, as most recently evinced by Disney’s announcement that Disney+ will roll out an ad-supported tier later this year.

“There’s always been multiple revenue models in the television business,” said Scott Schiller, a former NBCUniversal ad sales executive and global chief commercial officer at media and marketing services firm Engine.

That’s true of traditional TV. But streaming’s dual-revenue stream is a somewhat more recent phenomenon. For much of the past decade, streaming services’ revenue models largely split between subscriptions a la Netflix and Amazon Prime Video or advertising a la Pluto TV and Tubi. But then there was Hulu, which struck a balance between the two by operating a subscription-based, ad-supported tier. As seems to be commonly the case, Hulu’s is the model that the traditional TV network owners are now aping.

Discovery’s Discovery+ and NBCUniversal’s Peacock launched with subscription-based, ad-supported tiers. WarnerMedia’s HBO Max added one last year, as did Paramount’s Paramount+ (though technically Paramount+’s previous incarnation, CBS All Access, had already operated a subscription-based, ad-supported tier). And now Disney, which owns Hulu, will join the mix with its flagship streamer and seal the dual-revenue model’s imprint on the industry.

The reasons for companies to co-opt Hulu’s dual-revenue model are twofold and fairly straightforward. Those reasons basically boil down to traditional TV’s dual-revenue stream is dwindling and companies stand to make more money in streaming from a combination of subscriptions and advertising.

“Media owners will always maximize revenue models and be creative, especially as their most traditional, legacy models are challenged,” Schiller said.

Companies like Disney have enjoyed a dual-revenue stream on traditional TV — they make money from advertising as well as from pay-TV providers paying so-called “carriage fees” to carry their networks — and always needed to find a way to make at least as much money from streaming, be it from one revenue source or multiple. That need has taken on greater urgency as the pay-TV subscriber base has eroded, which can limit the number of ads the TV network owners have to sell and cut into the latter distribution revenue they receive from the pay-TV providers.

Meanwhile, in the streaming market, Hulu and more recently Discovery+ have shown the revenue upsides of operating subscription-based, ad-supported tiers. Both streamers generate more revenue per user, on average, if the person is on the paid, ad-supported tier than if they are on the paid, ad-free tier.

For this reason, Hulu’s then-ad sales boss Peter Naylor gave me a hard time about being an ad-free subscriber while we were catching up in Las Vegas during the Consumer Electronics Show in January 2019. “If you watched ads [by paying for the slightly cheaper limited commercials tier], we’d make more money. The ad-supported viewer is very — we sell a lot of ads. We’re good at it,” Naylor said at the time.

Discovery put a finer point on the revenue upside last year when the company reported generating $10 per month in ARPU for Discovery+’s ad-supported subscribers versus $7 per month when including ad-free subscribers. More recently, Comcast CEO Brian Roberts said that Peacock’s paid, ad-supported tier brings in (slightly) more revenue per subscriber than its ad-free tier.

Further fueling this streaming dual-revenue trend is the fact that — if a lower-priced, ad-supported subscription tier can help a streamer to add subscribers — that will give the streaming operator additional inventory to sell to a market of insatiable advertisers. “It’s the cliché thing to say, but there still isn’t enough premium TV inventory to go around,” said an agency executive.

Beyond the additional revenue, operating a lower-priced, ad-supported subscription tier provides “a safety net” for streaming services faced with subscribers churning month after month, said one streaming executive. “Subscription fatigue is real. You see everyone [including Netflix and Disney+] raising their prices. At some point, people say to themselves, ‘How much am I willing to pay, all in?’” the executive said. By offering a cheaper tier, the streamers are effectively offering existing subscribers a means of downsizing their streaming payments while also lowering the financial barrier to entry for new subscribers at a time when streamers, including Disney+ and Netflix, have seen a slowdown in subscriber growth.

“We certainly welcome it if [Disney+’s ad-supported tier] draws in more consumers, more subscribers, if it increases ARPU,” said Disney svp and CFO Christine McCarthy, speaking at the Morgan Stanley Technology, Media & Telecom Conference on March 7.

All of which amounts to Disney+ adding an ad-supported tier feeling almost immediately anticlimactic for its obviousness — and will inevitably refuel one of the streaming industry’s favorite questions: When will Netflix add ads?

In the past, the answer seemed to be a definitive “never.” 

“We, like HBO, are advertising free,” Netflix wrote in a letter to shareholders published in July 2019. “That remains a deep part of our brand proposition; when you read speculation that we are moving into selling advertising, be confident that this is false. We believe we will have a more valuable business in the long term by staying out of competing for ad revenue and instead entirely focusing on competing for viewer satisfaction.”

Fast-forward to literally yesterday when Netflix’s CFO Spencer Neumann spoke at the Morgan Stanley event, and the preeminent ad-free streamer’s answer is now, in Neumann’s words, “Never say never.”

What we’ve heard

“It’s inevitable there’s going to be consolidation around a very small number [of connected TV platform operating systems]. I predict three cheap, licensed TV brands; that Roku will remain the number-one brand; and that, if you’re Samsung, LG or Vizio, you have two choices: You can keep losing market share, or you can switch to a licensed operating system.”

Roku CEO Anthony Wood, speaking at the Morgan Stanley Technology, Media & Telecom Conference on March 7

3 (more) questions with VAB’s Sean Cunningham

Last week we published a Q&A with Sean Cunningham, who is CEO of the VAB, the trade organization that represents TV network owners and largely kicked off the ongoing measurement overhaul.

Lengthy as that Q&A is, the interview ran a bit longer.  The conversation eventually ran into the question of whether content quality can be quantified to the point of being considered part of the measurement equation.

Here is that exchange, which has been edited for length and clarity.

NBCUniversal, in their recent measurement framework look book, there’s a line where they say they believe any new measurement standard needs to account for the quality of content. Does the VAB share that view? And then how could you possibly create a standard that can account for content quality? That feels like such a qualitative thing and not something that could be quantitative in any way.

You’re onto it. It’s somewhat easy to explain in its extremes. When we say that there needs to be a factor that differentiates between a six-second ad that’s part of the news feed and a 30-second ad in the fourth quarter of the AFC Championship game that’s got a huge live audience, it’s understood. It’s when you start to move it towards the middle that it gets hard. I don’t think it’s as easy as just splitting it up between professional and user-generated [content]. Because the fact is, there are platforms right now that are doing incredibly well with people under 35 and over 35 who are just short-form videos that are largely UGC. And for them, it’s premium content. It’s going to be about agreeing to reasonable guardrails, is probably the best way to say it.

What does that mean: “reasonable guardrails”?

It may not be an absolute, defendable metric down to a decimal point. It may be something where there’s a range from more this [to] less this. It remains to be seen; that’s what I mean by guardrail.

Would that still qualify as a standard?

I think that it can. Therein lies one of the things as well. Standards, heretofore, largely are down to decimal places, and we intend to get as close as we can on as much of that as humanly possible. But there’s one where the market may be served more by another mechanism, such as a range.

Numbers to know

15.1 million: Number of active accounts for Vizio’s SmartCast connected TV platform.

$350 million: Valuation of production company Industrial Media after selling a majority stake to Sony Pictures Television.

10%: Percentage share ownership that ITV has taken in BritBox after buying BBC’s stake in the subscription-based streamer.

£1.35 billion ($1.77 billion): How much money ITV will spend on content by 2023 to build its streaming business.

$300,000: How much money YouTube is offering to pay podcasters to produce video versions of their shows for the Google-owned platform.

What we’ve covered

How A+E Networks’ Mark Garner is managing the TV network group’s programming library in the streaming era:

  • As evp of global content sales and business development at A+E Networks, Garner is charged with doing deals to distribute the company’s own original programming.
  • On the Digiday Podcast, he discussed how A+E Networks evaluates its programming and digital distribution opportunities.

Listen to the latest episode of the Digiday Podcast here.

How publishers are tackling the Ukraine-Russia war disinformation problem on TikTok:

  • Disputing false claims or saying a video is fake is more difficult on TikTok than on other platforms.
  • To address the issue, publishers are avoiding viral videos, producing videos that seek audiences’ involvement and keeping high verification standards.

Read more about TikTok’s disinformation problem here.

Q&A with VAB CEO Sean Cunningham on the trade org’s role in the TV ad industry’s measurement makeover:

  • The VAB plans to announce something related to the measurement standards it’s developing sometime in 2022.
  • In an interview, Cunningham addressed the question of how the VAB can be objective when it counts multiple Nielsen rivals as members of the trade group.

Read more about the VAB here.

How Disney is using its audience data and Hulu’s ad tech to compete with Google, Meta and Amazon:

  • Disney is in the midst of unifying its ad tech stack on the Disney ad server, which is based on Hulu’s ad server.
  • Disney has 218 million monthly unique visitors in the U.S. and 100 million household-level IDs.

Read more about Disney’s ad tech strategy here.

What we’re reading

CNN’s final prep on CNN+:

Later this month, CNN will officially roll out its subscription-based streamer CNN+, which will initially be priced at $2.99 a month and eventually go up to $5.99 per month, according to Los Angeles Times.

Twitch’s executive exodus:

Roughly a half-dozen top executives have left Twitch since the start of 2022, including the Amazon-owned video platform’s COO, according to Bloomberg.

YouTube’s child-proofing:

With YouTube Kids, YouTube initially tried to replicate the hands-off, algorithm-dependent approach it has taken with its main platform. That didn’t work. But relying on heavier human curation has, according to The Wall Street Journal.

Esports’ controversial contracts:

The esports industry seems to be rife with organizations pressuring athletes into contracts that give the upper hand to the organization at the expense of the athlete, according to The Washington Post.

Hollywood’s podcast IP pot:

Podcasts are rivaling books as a fount of ideas to be successfully pitched and adapted into TV shows and movies, according to The Hollywood Reporter.

Paramount+’s lack of identity:

A year after rebranding CBS All Access as Paramount+, Paramount’s flagship streamer has lacked enough splashy original shows to make a big splash in the saturated streaming market, according to The Verge.

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Boeing’s Starliner carried a ‘Kerbal Space Program’ character to the ISS



Boeing’s Starliner carried a ‘Kerbal Space Program’ character to the ISS

After two-and-a-half years of delays, Boeing’s Starliner capsule successfully docked with the International Space Station. It was an important milestone for a company that has, at least in the popular imagination, struggled to catch up with SpaceX. So it’s fitting how Boeing decided it would celebrate a successful mission.

When the crew of the ISS opened the hatch to Starliner, they found a surprise inside the spacecraft. Floating next to Orbital Flight Test-2’s seated test dummy was a plush toy representing Jebediah Kerman, one of four original “Kerbonauts” featured in Kerbal Space Program. Jeb, as he’s better known by the KSP community, served as the flight’s zero-g indicator. Russian cosmonaut Yuri Gagarin took a small doll with him on the first-ever human spaceflight, and ever since it has become a tradition for most space crews to carry plush toys with them to make it easy to see when they’ve entered a microgravity environment.

If you’ve ever played Kerbal Space Program, you have a sense of why it was so fitting Boeing decided to send Jeb to space. In KSP, designing spacecraft that will carry your Kerbonauts to orbit and beyond is no easy task. Often your initial designs will fall and crash as they struggle to fly free of Kerbin’s gravity. But you go back to the drawing board and tweak your designs until you find one that works. In a way, that’s exactly what Boeing’s engineers had to do after Starliner’s first test flight in 2019 failed due to a software issue, and its second one was delayed following an unexpected valve problem.

Boeing kept Jeb’s presence on OFT-2 secret until the spacecraft docked with the ISS. A spokesperson for the company told collectSPACE that Starliner’s engineering team chose the mascot in part because of the science, technology, engineering and math lessons KSP has to teach players. Jeb will spend the next few days with the crew of the ISS before they place him back in the spacecraft for its return trip to Earth.

All products recommended by Engadget are selected by our editorial team, independent of our parent company. Some of our stories include affiliate links. If you buy something through one of these links, we may earn an affiliate commission.

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COVID-19 makes automation more important than ever for enterprise integration



COVID-19 makes automation more important than ever for enterprise integration

We are excited to bring Transform 2022 back in-person July 19 and virtually July 20 – 28. Join AI and data leaders for insightful talks and exciting networking opportunities. Register today!

As a longtime supply chain technology professional and head of a software company focused on enterprise (B2B) cloud integration, I’ve been watching several key trends that are shaping the fortunes for ecommerce and digital transformation as organizations push through the business impacts of the ongoing pandemic. These include the need for more IoT deployments and the rise of collaboration platforms to cope with increasingly remote and hybrid work environments. We’re also seeing enterprise end-to-end visibility across the business ecosystem emerge as a top C-suite priority.

These factors will help define the level of success organizations can expect in transforming data into value and impact. Ecosystem Integration, which is an advanced approach to multi-enterprise B2B/EDI integration that creates seamless end-to-end integrations that connect partners, applications, systems, and marketplaces, enables organizations to leverage collaborative platforms and increase end-to-end visibility. It’s a multilayered approach with various technologies that, when combined, amount to more than the sum of its parts. For the sake of this article, let’s zero in on automation as the common underlying capability that will best serve in the months and years ahead as an increasingly critical lynchpin for successful ecosystem integration adoption.

Pandemic fuels rush to adopt automation

As we continue to adjust to the new normal of pandemic-induced pressures on supply chain and business processes overall, automation and no-code are becoming more central as a foundation for digital transformation. That’s because COVID-19 showcased the fragility of manual processes. Recall how organizations struggled under the pressure of workforce lockdowns and the virus hindered efforts to become more agile in supply chain and other operations that were disrupted by the pandemic.

The pandemic is not yet over, but far enough along that we can see how companies like Amazon and others that invested in automation succeeded in growing both revenue and profitability despite the shutdowns. These success stories are sinking in, and that’s driving consensus and C-suite buy-in at more companies to automate core business processes. Further accelerating adoption is the increasing availability of tools and techniques that lower the barriers to entry for companies that may have thought automation solutions were out of reach. 

Automation tools and the low-code technologies that support them are fueling an expanded list of use cases and applications. Low-code automation simplifies the complexities of traditional back-end programming through more user-friendly interfaces and apps. This can shorten development cycles and allow organizations to automate more of the core processes that most impact operations and revenue.

Helping companies where they need it most 

Automation can help businesses in the process areas hit hardest by the pandemic. Consider the realm of transportation, a key part of the supply chain equation in a time when supply chain logistics have been hammered by COVID-19.

Developer experience (DX) teams can automate order processing and customs documentation with new electronic data interchange (EDI) capabilities, complete with rules engines for validating load tenders, invoices and shipment-status messages. Trucking providers can also enhance their application programming interface (API) integration to achieve more accurate load-tender processing and eliminate errors between the various transportation management systems (TMSs) of freight customers. With the right automation, these efficiencies can hold up even at the scale of large fleets. 

Transportation logistics may be near the epicenter of pandemic impacts, but those impacts ripple far and wide through the spectrum of business operations. That’s why the opportunities and benefits of automation extend across the broader spectrum of business process automation.

For instance, companies hoping to excel in ecommerce and direct-to-consumer (D2C) operations can leverage automation to gain visibility and control across revenue-critical business processes like order-to-cash and procure-to-pay. This can be done by automating end-to-end processes that streamline the integration of internal applications with the external ecosystem of business partners, ecommerce sites, marketplaces and even consumers directly. 

Automation: A top digital transformation priority in 2022

Automation allows for more efficient, scalable and agile control over a wide range of integration use cases that deliver more valuable insights and smoother operations. Along with this comes better visibility and more steady and secure innovation as organizations evolve their operations, even in the face of pandemic disruptions and other business headwinds. That’s why, as we forge further ahead into 2022, automation and no-code are cementing their place as vital components for any digital transformation.

Mahesh Rajasekharan is CEO of Cleo.


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iFixit will sell replacement parts for almost every Steam Deck component



iFixit will sell replacement parts for almost every Steam Deck component

We knew going into the launch of Valve’s Steam Deck DIY repairs would be easier than most modern electronics. And now it looks like finding replacement parts won’t be difficult either. On Friday evening, iFixit prematurely published a list of components it will offer for Valve’s handheld. The list revealed the company plans to sell spare parts for nearly every component found in Steam Deck, including replacement motherboards complete with the handheld’s custom Aerith chipset from AMD.

Earlier today we published some pages related to our upcoming parts launch with Valve. These went live earlier than we planned, so we ended up taking them down. If you did get a parts order in, we’ll honor it. 💙

Stay tuned for the real launch soon!

— iFixit (@iFixit) May 21, 2022

As The Verge points out, the company will even sell parts that could be considered upgrades. For instance, if you own the 64GB or 256GB model, you can buy the 512GB variant’s display to get the anti-glare screen that comes on that version of the handheld. For any panel replacements, you can also spend an extra $5 to obtain a “Fix Kit” that comes with all the tools you need to complete a screen swap.

One part iFixit won’t sell immediately is replacement batteries. It will offer those at a later date. “We don’t have a solution for battery repairs on day one, but we are committed to working with Valve to maintain these devices as they age,” iFixit CEO Kyle Wiens told The Verge. “Battery replacements are going to be essential to making the Steam Deck stand the test of time.”

Other spare parts that won’t be available on day one include replacements for the Steam Deck’s touchpads and face buttons. Most of the components are reasonably priced. For example, you’ll need to spend $20 to repair a broken thumbstick. The most expensive part on the list is a new motherboard, which will set you back $350. With a complete handheld from Valve starting at $400, it won’t be economical to build your own Steam Deck with parts from iFixit, but for most repairs, the company will have you covered.  

All products recommended by Engadget are selected by our editorial team, independent of our parent company. Some of our stories include affiliate links. If you buy something through one of these links, we may earn an affiliate commission.

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