Fox Corp.’s decision to pass on the bidding for rights for Thursday Night Football, coupled with the increasing prospects of its streaming service Tubi, could mean a big growth spurt for the programmer, according to a MoffettNathanson report.  

In a research note, MoffettNathanson media analyst Robert Fishman wrote that by not participating in the recent Thursday Night Football rights auction, where Amazon agreed to pay about $1 billion annually for exclusive rights, Fox can focus on its existing Sunday NFL package and steer some of that money toward obtaining additional sports rights. In addition, Fox’s streaming service Tubi, purchased in 2020 for about $440 million, is poised to substantially increase its revenue output. 

In the report, Fishman, who reiterated his "Buy" rating and $50 price target on the stock, estimated that Tubi could substantially increase its advertising revenue, adding that the AVOD service expects to boost ad sales from about $150 million in fiscal 2020 to about $380 million in fiscal 2021. As the service increases its ad load -- currently at the low-end among its peers -- advertising revenue could balloon to nearly $650 million in fiscal 2022, reaching $1 billion by fiscal 2023 and $1.7 billion by fiscal 2025.

Fox last released Tubi subscriber numbers in September, when it said the service had 33 million monthly active users (MAUs) who consumed 230 million hours of content each month. But Fishman wrote he expects most of Tubi’s ad revenue to be non-cannibalizing to the other Fox networks, adding that the streamer has said that about 80% of its viewers can’t be reached by the top 25 cable networks.  

With its Sunday NFC package in hand, Fox should maintain its strong position to monetize key sports rights,” Fishman wrote. He added that Fox and Disney (which participated in the NFL rights auction through its ESPN and ABC units) will likely maintain some exclusivity to its linear TV channels. Tubi is expected to stream condensed game reruns and various on demand components of league content, but not to the extent of ViacomCBS and NBCUniversal, which have said they would simulcast some games on their respective streaming services. For Fox, that differential could translate to higher retrans and pay TV channel fees, Fishman wrote. 

“We expect distributors will start to be more aggressive with ViacomCBS and NBCU networks (and their non-owned and operated affiliates) as they plan to simulcast their own NFL packages on their OTT services,” Fishman wrote. "While there is the risk that this will lead to more cord-cutting and higher consumer pricing to offset the rising cost of sports rights, we think Fox should be in a position of relative strength to capture an increasing share of retrans and affiliate dollars in upcoming MVPD renewals.”

There were only nine minutes of commercials in last week’s premiere of Waco, the first piece of high-profile, big-ticket programming on Viacom’s new Paramount Network.

The low advertising load — with half the normal number of breaks, and each break a bit shorter than usual — is part of the network’s attempt to simulate the experience viewers get on premium channels. There were no commercials until about 16 minutes into the episode, a big change for Viacom, which has been criticized for stuffing too many spots into shows on its networks to make up for declining ad revenue.

Kevin Kay, president of Paramount Network, CMT and TV Land, said he hoped viewers would notice the lack of ads. Just in case, before the first ad pod, which contained a one-minute trailer for a new movie from Paramount Pictures, the network announced that, “The world premiere of Waco is presented with limited commercial interruptions by the new film Annihilation.”

“I think the viewer will feel and understand that they saw something different,” Kay said. “I think if you’re a viewer of scripted premium and you see a trailer for a big feature, it doesn’t feel like [a commercial], with all due respect to all of our other sponsors.”

Paramount Network replaced Spike TV on Jan. 18, launching with a live edition of one of Spike’s higher-rated shows, Lip Sync Battle. Spike was struggling, with viewership among adults 18-49 down 24% during 2017. Paramount’s live Lip Sync Battle had the series’s highest rating since June 23, 2016.

The Waco premiere drew a 0.6 overnight rating and 1.1 million viewers to Paramount (more with the simulcast on CMT). Paramount called the performance “very encouraging” on a competitive night and expects the show to get a boost when delayed viewing is added in. Tinkering with ad formats is one way the Paramount Network aims to entice viewers and advertisers.

Related: Ratings Up in First Week for New Paramount Network

“We realized the viewers are used to not having to watch commercials on the [subscription video-on-demand] platforms for sure; HBO and Showtime as well,” Kay said. “But we’re still pay cable, and somebody’s got to pay the bills. These shows ain’t cheap. But one of the things we’re talking about is how do we change that viewing experience and make it more like a premium experience.”

Kay said future episodes of Waco would have a similarly low ad load, as will upcoming programs Heathers, Yellowstone and American Woman.

Those ’70s Ads
Another idea Paramount has for creating a premium environment involves having advertisers create 1970s-style commercials to air in American Woman, because the show is set in Beverly Hills in the ’70s.

“You’ll feel like you’re still in the ’70s when you’re in the commercial breaks,” Kay said. “We are out there selling and we’ve got a lot of interest.”

The network is also looking to have individual advertisers sponsor entire episodes.

“I think ideas like that are what we need to continue to refine,” Kay said. “But I think we’re off to a good start because we’ve gotten a lot of good feedback on these ideas and a lot of people want to work with us.”

Advertisers like the idea of a less-cluttered commercial environment.

“Giving consumers a positive viewing experience can only help the advertising efficacy,” Havas Media chief investment officer Jason Kanefsky said.

It’s an idea that other networks have put in place. Turner has cut the ad load on truTV and in original series on TNT and TBS. Also, NBC reduced the number of spots on Saturday Night Live. But the bigger question may be whether the TV business needs another network.

“In a world where [over-the-top] is becoming more important and smart televisions are allowing consumers to pick and choose shows, as opposed to picking and choosing networks, branding and rebranding networks doesn’t necessarily create success,” Kanefsky said.

The success of Paramount Network is a key part of Viacom CEO Bob Bakish’s strategy to turn around Viacom, which has been suffering from declining ratings, lower ad revenue and falling profit. Analysts have embraced Bakish’s plan to focus investment on a handful of flagship networks, including Paramount.

While the Spike TV rebranding didn’t work out for Viacom, Kagan senior analyst Derek Baine said the Paramount name is better-known. “Hopefully, the rebrand and a bigger programming budget will result in a more successful rebranding,” Baine said.

Kagan forecasts Paramount Network will generate $375.1 million in net ad sales in 2018, up 36% from Spike’s $276.2 million in 2017. “We are projecting ratings go from a 0.3 to a 0.4, which is not hard to do with a rebranding,” Baine said.

Kay said the Paramount Network doesn’t plan to cut ad loads on shows that are already on the air. But with the network ratcheting up its star power and shifting focus from men to attracting a broader audience, advertisers are already responding.

Spike’s air was filled with shows including Cops, as well as Impact Wrestling and Bellator MMA action, that scared off some content-sensitive advertisers.

“Cops was always a tough sell, wrestling was a tough sell. We’ve worked hard over the last month and a half to change that perception,” Kay said.

The network has cut back on those shows and added classic sitcoms including Friends and Two and a Half Men to its daytime lineup. “We’re seeing a lot of new sponsors interested in the Paramount Network,” said Kay. Procter & Gamble is advertising more, Sonic remains a big supporter and Delta Faucet has signed on.

Adding star power to its original programs might also help.

Kay said he recently watched the first cut of the first episode of Yellowstone.

“When Kevin Costner gets up on his horse and puts on the cowboy hat, that’s money,” he said.

Netflix, with its ad-free content, has profoundly changed the way consumers watch TV. Some estimates claim Netflix saves consumers more than six days of their life, or about 157.87 hours, per year in commercials not watched compared with a traditional cable provider.

To put this in context, the traditional hour of TV has almost 16 minutes of commercials.

This leaves broadcast channels and the service providers that carry them in quite the predicament. Consumers are getting used to a commercial-free experience, which is certain to affect future programming. This is because ads play a critical role in funding the development of creative video programs, and if they disappear altogether, then the ecosystem will not be nearly as vibrant.

I believe we’ll soon see a future in which there are far fewer advertisements, but more personalized content within those advertisements when they do play.

I’m not alone in this thinking. According to analyst firm Ovum, data will transform the business of visual entertainment and drive the biggest shift in the balance of power in TV in the 2020s. We’ll see increasingly granular, personalized TV services, as the main unit of TV consumption continues to shift from households to individuals.

To make this personalized advertising approach successful, service providers working with broadcasters need first to identify the target viewer persona across multiple devices. This can easily be done using Netflix/Hulu-style profile selection linked to a consumer’s Facebook or Google account. However, with privacy being front and center in the U.S. right now, service providers will need to manage consent through an opt-in before information is collected. Once access is granted, the service provider can use various data sources like social media and viewing habits to create a “360” profile that is unique to the viewer.

They have this data – they just need to know how to leverage it.

The main question here is: Will consumers be more willing to share private information if it means getting less, but more relevant, commercials during their favorite shows? While privacy is important, I’m willing to bet consumers would be willing to participate, at least at some level, if it means less friction and fewer ads.

If done right, personalized ads can generate much more revenue per view than general targeted ads today, which means a consumer could see a fraction of the commercials they do now, but the same revenue is obtained.

While it may seem like fewer commercials mean less overall revenue for broadcast and service providers, more targeted ads would increase interaction and potential purchases. According to a survey conducted by ad insertion company Yospace, 78% of audiences are more likely to take notice and 55% are likely or very likely to look online for a product if they’re personally targeted by an ad.

Broadcast and TV content providers can look to offset initial losses with options like ad-funded free content or better incentives to purchase digital content.

We are seeing some very big telecom carrier moves in the media space, such as AT&T’s purchase of DirecTV, and this creates advertising inventory space to monetize from any screen the consumer is using. With this in mind, it’s clear the advertising business is a key revenue stream to consider and perhaps revamp entirely.

While advertisements aren’t going completely away, more personalized commercials are a clear next step as service providers look to further monetize their offerings by using customer data. This is the only true way to battle the idea that content should be commercial-free due to the likes of Netflix.

Besides, wouldn’t you want some of your 158 hours per year back?

Gary Miles is chief marketing officer of Amdocs.

Over-the-top services helped drive television viewership up 1.2% in October, but those same consumers watched fewer commercials, according to a report by Pivotal Research Group senior analyst Brian Wieser.

In a report issued Tuesday, Wieser looked at the trends associated with television use and commercial share for national media owners in the U.S. for the calendar month of October (rather than the broadcast month, which ran from Sept. 26 to Oct. 30), using data from Nielsen that included time-shifted viewing and commercial impressions.

What Wieser found is that total TV usage was up by 1.2% on a total day basis for adults 18-49 during the month and rose 2% among all households. But commercial viewing by the same age group fell in the period by 1.4% on a total day basis and was down 2.4% in prime time.

Perhaps adding to the lower commercial views was that 65% more viewers watched via Internet-connected devices, accounting for 8.1% of total TV use among adults 18-49 on a total day basis.

Total programming hours were flat compared to last year during the month. And though total commercial impressions were up 2.6% (940 billion commercial impressions) among adults 18-49 included in C3 ratings (which excludes Internet-connected devices), it was driven mainly by higher commercial loads. National commercial loads across the industry rose to an average of 10.8 minutes per hour across all Nielsen-tracked programming in October, up from 10.5 minutes per hour in the prior year.

Also driving the viewership increases were an extra week of NFL Football in the month compared to last year and heavy viewing on news networks like CNN, Fox News and MSNBC due to the Presidential election.

Among networks, NBC Universal produced the largest share of C3 commercial impressions during the month, with 14.6% of adults 18-49 up from 14.5% in the prior year. Viacom fell from 14.3% to 13.8%, Time Warner was down from 11.8% to 11.2%, and Disney was down to 11.8% from 10.8% last year, according to Wieser. Fox was up from 9.3% to 11%, while CBS was down from 7.5% to 6.8%. Discovery was down from 6.0% to 5.8%. Scripps was up from 4.6% to 4.5%, and AMC was down from 3.9% to 3.3%.