Why Controlling The TV’s Operating System Matters
The following is an excerpt from our newest TVREV Special Report, “TV’s OS Wars: The Battle For Interface Dominance. Part 1.” It is a free download thanks to our sponsors ZEASN and LG Ad Solutions.
There are a number of reasons why owning the television operating system has become so important. In this section, we’ll explore what they are and why they matter.
Interaction: Whoever controls the interface controls how people interact with their TV. This impacts everything from what services they watch, what shows they watch and how long they watch.
It even impacts how much time viewers spend searching for something to watch. An interface that is laid out with iPhone-like tiles is not designed for browsing the way one with multiple options on the home screen is.
Gatekeepers: Whoever owns the OS is the de facto gatekeeper for content, controlling which apps appear on the TV, what order they appear in and how easy they are to find and install. This gives them significant leverage over the apps that want to be on their platform and helps to shape the user experience.
Ad Revenue: Whoever owns the OS can make significant amounts of ad revenue selling tune-in/download ads to media companies and others. The real estate on the home screen is quite valuable and media companies and even brands will pay handsomely to own it. This can create a significant additional revenue stream for manufacturers and for those who own the software that powers the interface.
In addition, operating system owners can roll out their own content platforms, generally FAST services, that provide yet another lucrative source of ad revenue, while at the same time increasing the degree of stickiness that a popular service can provide.
Ad Interactivity: Owning both the hardware and the software gives OS owners the ability to introduce new ad formats and technology on the home page and on the ad inventory they own via their FAST service.
This can help them to increase the amount of ad revenue they make as interactive formats traditionally command higher rates. At the same time it makes the ads more relevant and engaging, creating a superior user experience for consumers.
Data: Whoever owns the OS can collect vast amounts of viewer data that are valuable to both advertisers and content creators. This includes ACR (automatic content recognition) data on viewership. ACR has become the industry’s new currency for viewing measurement, providing insight into household viewing on a second-by-second basis for tens of millions of users—a much broader base than was available via traditional panels.
In addition to ad sales and content negotiations, ACR data can help the OS owner to program their own FAST channels, giving them insight into what types of shows perform best at what times and what groupings are more effective.
The data can also be sold to third parties for their own measurement apps, providing yet another source of recurring revenue.
Whoever controls the data really controls the oil in the TV ecosystem and I think that is going to be crucially important.—Evan Shapiro, Founder, ESHAP
