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Guest Blog: Looking Ahead to 2016: M&A, Programmatic, Ad-Blocking and What Will Netflix Disrupt Next?

As we approach the end of the year, it is time to look forward to what the coming year will bring to the future of TV and video advertising. The video tech market is moving faster than most; despite the maturity of the industry, a number of trends are emerging in the market with the power to cause massive disruption. It seems as if almost everything is in play, from business models, to technologies to the growth of SVOD and how it is impacting the broader industry. Like others, we are keeping our eyes and ears peeled, analyzing the market to identify what’s coming next. Here I share a few of my predictions for 2016.

Market consolidation will accelerate, causing smaller content providers to scramble:

The first and most prevalent trend is the consolidation of the market. The industry as a whole has made substantial moves, and they’ve been at a global scale. Here at Ooyala, this trend has been up close and personal: we were acquired by Australian-based telecom leader Telstra, then Ooyala subsequently acquired ad-tech company Videoplaza in Sweden and media logistics company, Nativ, in London. In other moves, AT&T purchased DirecTV for $49B in the U.S. U.K.-based Liberty Global bought CWC for roughly $5.3B to expand into LATAM and paid another $88M for Irish broadcaster, TV3, as they grow in EMEA.

In 2016, we’ll see the impact of these major acquisitions as strategies unfold. In particular, on the heels of AT&T’s acquisition of satellite-TV provider DirecTV, the company announced they reached “the best distribution deal in the industry” with Viacom’s TV brands, including Comedy Central, MTV and Nickelodeon. While the specifics of the deal aren’t available, it certainly includes multiplatform distribution rights with a potential mobile offering that’s yet to be revealed. Expect to see more of these in 2016: linear and OTT deals that emphasize cross-device and IP-delivered services. TV rights deals will mandate that OTT delivery is included moving forward, causing smaller cable providers – like the 60 providers that parted ways with Viacom in 2014 – to scramble to compete by offering on-par OTT deals for content providers. OTT delivery will become a requirement to secure the most attractive premium-content deals.

Programmatic will usher in a new age of personalized advertising:

Early in 2015, Sky announced the launch of Sky AdSmart, their new advertising solution that delivers different adverts to different homes watching the same program. And it’s picking up steam. The company recently stated that Sky AdSmart is now available in one out of every four U.K. households, and channels that have adopted Sky AdSmart see a whopping 33% reduction in users switching channels during ad breaks. The personalized ads are purchased programmatically, allowing brands and agencies a myriad of personalization options, including which creative is played for which region, demographic, frequency and more, combining to create a unique network where the SKY set-top boxes act as individual ad servers.

In 2016, expect to see more premium broadcasters and publishers take on programmatic advertising as the old-fashioned way of purchasing – in particular, using sample-audience metrics to drive decisions – becomes passé. We already see this move happening rapidly in the OTT space, in fact, AdExchanger recently stated programmatic will account for anywhere from 55-70% of global digital ad spend in 2016. But expect to see more programmatic trading find a firm footing in linear TV as well. It will be focused on tailoring the advertising to the user on the device they prefer, time, location and in the right context to keep them engaged longer.

It’s all in the name of bettering the ad experience, something the industry was scrutinized over in 2015, caused by the onslaught of ad blockers and the explosion of discussions on how to beat them. Will programmatic be the saving grace? Well, no. It will take more than hyper-personalized, programmatic trading and ad placements to stop users (largely millennials) from downloading ad blockers, but it is putting the right foot forward.

Want to know what the industry will broadly adopt next? Look to Netflix:

It’s the tale as old as time, or at least as old as Reed Hastings: Netflix sets precedents and the industry follows suit. From launching an over-the-top SVOD service, to building original series and now original full-feature films with the recent launch of Beasts of No Nation, Netflix has been the first to many things when discussing topline trends and predictions around the future of TV. 2016 will be no different.

On the Beasts of No Nation front, the picture marks a unique milestone in the world of film as it disrupts the “content windowing” business model that film studios across the globe have relied upon to maximize profits. If you’re not familiar, this is the flow: first a movies launches in the theater, reaping high ticket sales, then it moves over to high-priced PPV options such as hotel chains or in-flight, then premium channels like HBO or Showtime pick it up, then finally it makes its way to cable and DVD and, if it’s lucky, it retires as a re-run on low-tier TV networks. Netflix very well could disrupt this tried and true journey. By launching a full-feature film for free on their SVOD service, Netflix eradicates that entire pipeline of revenue flow for a single movie, resetting (yet again) how consumers should come to expect how content is available, accessible, and in particular how much it should cost.

Further, next year, especially as Netflix continues to expand into new countries and regions, expect to see SVOD services break into the two holy grails of TV: live and sports. Netflix is already launching a live talk show with Chelsea Handler in late 2016, but has yet to indicate any sort of leap into sports. Their hesitation has largely been due to the fact that bidding for sports rights is ridiculous. Take for example the Yahoo! and NFL deal that happened earlier this year, to globally live stream one game from Wembley Stadium in London. Industry pundits suggested Yahoo! paid the NFL an estimate of $20 million to do so. That’s not sustainable for Netflix, or anyone else for that matter, though as they grow globally they’re building a global platform with millions of subscribers that could support such an event – but we’ve yet to see it.

As Netflix begins to hint at doing live events, expect to see more digital platforms like the Yahoos or Facebooks of the world, the folks with global audiences and video-ready capabilities, to put their stake into live-event streaming as well.

There’s no question that TV is still evolving. And as proven by Darwin’s theory, no one can escape it. Small changes in business models, delivery or advertising in the U.K. can cause ripple effects to the U.S. and beyond, or vice versa. TV is more accessible than ever before, free of cords and contracts, and the subsequent effects will impact business in 2016. Let’s all hang on and enjoy the ride!

Ooyala helps deliver content that connects through online video analytics and monetization solutions designed to help large-scale broadcasters, operators, media companies, enterprises and brands build more engaged and more profitable audiences, and monetize video and TV with personalized, interactive experiences across any screen.