Tech Here's how Fox chairman Lachlan Murdoch sees the future of TV ad business (FOXA)

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Lachlan Murdoch, executive chairman of 21st Century Fox, shared his thoughts on Fox’s TV brands and the future of TV ads at the Goldman Sachs Communicopia Conference

bii social video digital ad spend has overtaken tv advertising play

bii social video digital ad spend has overtaken tv advertising

(BI Intelligence)
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Lachlan Murdoch, executive chairman of 21st Century Fox, shared his thoughts on Fox’s TV brands and the future of TV ads at the Goldman Sachs Communicopia Conference on Wednesday. Fox’s sports and news shows are the only things viewers still watch live, according to Murdoch.

He also stated his prediction that ad loads will come down across the board, to attract audiences that are accustomed to ad-free over-the-top (OTT) options like Netflix.

The success of Fox’s sports and news channels could be evidenced by the group’s ad revenue breakdown. Murdoch indicated domestic entertainment advertising, which does not include news and sports, was a small portion of Fox’s global revenue — domestic entertainment advertising revenues represent only 9% of group’s revenue. The relatively low 9% figure of ad revenue that comes from domestic entertainment can imply that the bulk of Fox's other ad revenue comes from sports and news.

There have already been instances of major media companies decreasing TV ad loads.Turner and Viacom have experimented with showing fewer ads, although the companies have yet to see benefits from doing so. Additionally, the NFL plans on reducing the amount of commercial breaks for the upcoming season in a bid to reverse declining ratings. Media companies are decreasing ad load as to appeal to viewers that are increasingly turning away to view content on digital platforms.

Fox is taking steps to ensure it can make money on the viewers that aren’t watching its shows live. Users have exhibited high engagement on ads run on the company’s streaming app, Fox Now. The company’s ad format — which requires viewers to engage with an ad for 30 seconds to be able to watch 30 minutes of ad-free programming — has been received well by users. Users often spend longer than 30 seconds on the ad once they are engaged, according to Murdoch. This high engagement among Fox Now mobile ads is important, given more than half of Fox viewers are not watching the company’s shows on traditional TV.

The TV ad industry is one of the largest ad segments in the US — and it's ripe for digital disruption.

Digital display advertising was disrupted by programmatic technologies because of the operational efficiencies gained from automating manual processes. But TV is a completely different animal. The TV advertising space is entrenched in traditional processes that largely depend on direct negotiations between ad buyers and sellers. By incorporating more data, TV advertisers can fine-tune their targeting beyond broad consumer groups, and potentially see higher returns on their ad spend.

But the way consumers watch TV content is changing, and data collection is getting more expansive. Disrupting an ad industry with a history spanning over eight decades will be a significant hurdle for programmatic TV (PTV) adoption.

Kevin Gallagher, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on programmatic TV advertising that:

  • Forecasts US programmatic TV ad revenue through 2021.
  • Highlights the top beneficial attributes of PTV.
  • Explores some of the top barriers and challenges to PTV adoption, including measurement hurdles and fears around commoditizing TV inventory.
  • Outlines strategies some networks are taking when incorporating PTV in their upfront offerings.

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