The growth of the digital TV ad market, in 5 charts

Digital video is no longer an afterthought for television industry executives.

While audience and revenue at most cable and broadcast networks either declined or remained flat last year, their digital video operations are growing at a healthy pace, according to a new report from video ad tech firm FreeWheel. Compared to 2013, broadcasters experienced 67 percent growth on their fall 2014 TV shows’ digital video ad views, FreeWheel found (based on over 125 million video views the company measured last year).

“That big, granular number shows what content is really driving growth,” said Brian Dutt, author of the report and FreeWheel’s advisory services director. “A lot of the audiences coming into digital are coming over for the shows they would have watched on their TV or DVR.”

The broader digital video industry, which includes traditional TV programmers and digital-first publishers, saw a 25 percent increase in video ad views during the fourth quarter of 2013 compared to the same period the previous year, FreeWheel’s data showed. FreeWheel, which was acquired by Comcast in March 2014 for $360 million, serves clients such as Fox, NBCUniversal, Viacom and DirecTV, as well as digital players including AOL, Vevo and Crackle.

Ad and video view growth
(Source: FreeWheel Video Monetization Report Q4 2014)

Here are some other takeaways about the state of digital TV and premium video monetization:

Traditional TV is lagging behind digital video
While the traditional TV market remains critically important to advertisers, it isn’t performing nearly as well as its digital cousin. Overall spending on traditional television softened by 2 percent in the fourth quarter, according to Standard Media Index, which claims to measure 80 percent of total U.S. agency spend.

Among the broadcast networks, NBC grew its ad revenue 3 percent, CBS grew 2 percent, and Telemundo grew 5 percent, according to SMI data. Others weren’t so lucky: Fox declined 12 percent, Univision was down 6 percent, and ABC was down 2 percent, SMI reported. On the cable front, ESPN grew 3 percent, AMC grew 28 percent, and Viacom grew 2 percent.

TV network performance

The scope of the TV market remains substantially larger: Research firm eMarketer pegged the total 2014 TV ad spend at $68.5 billion, compared to just $6 billion for digital video last year. But traditional TV networks are finding a lot more room to grow in the digital space. and grew their digital bookings by 104 percent and 70 percent respectively in the fourth quarter, driven largely by their online video offerings, according to SMI.

TV Everywhere is booming, thanks to live sports
TV Everywhere, a catch-all name for authenticated digital video viewing services from providers such as Comcast and Time Warner Cable, appears to have finally broken through to consumers. Most people with a cable package also pay for TV Everywhere, but not all subscribers choose to take advantage of that service or even realize they have it.

Yet compared to the fourth quarter of 2013, authenticated viewing in the fourth quarter of 2014 grew a massive 591 percent, according to FreeWheel. TV Everywhere now accounts for 56 percent of monetization on live content and content longer than 20 minutes, such as TV shows, feature films and sporting events. That “long-form” content, which includes live streams, accounts for 52 percent of TV programmers’ overall digital ad views, showing how substantial a TV Everywhere has become as a content monetization vehicle.

“There’s obviously still a long way to go for digital video to match the scale of [traditional television], but it can happen in pretty quick bursts,” said Dutt. “The growth in TV Everywhere and live really speaks to that.”

Live viewing ads
(Source: FreeWheel Video Monetization Report Q4 2014)

Dutt attributes the rapid uptake of TV Everywhere services to live sports, which send people scrambling to find their authentication credentials. They’re like a “gateway drug,” he said.

“It starts with the Olympics or World Cup or Super Bowl, these big events where if you’re not near your TV and need to engage with the content, you’re going to do whatever you need to do to watch,” said Dutt. “Then it becomes a way people want to continue engaging with content.”

In the fourth quarter, 23 percent of TV programmers’ digital ad views were on live content, and 83 percent of those live ad views came from sports content.

Media boxes matter more than tablets
That Apple TV, Roku or PlayStation 4 sitting beneath your television now represents a more important video consumption medium than Apple’s iPad. In the fourth quarter, “over-the-top” devices served 8 percent of all digital video ad views, a 236 percent year-over-year increase. Tablets, meanwhile, accounted for just 7 percent over total digital video ad views in the fourth quarter, up 14 percent from the same period in 2013.

Ad views by device
(Source: FreeWheel Video Monetization Report Q4 2014)

“A lot of the initial usage has been focused on subscription models, and also the download-to-own models,” said Dutt. “The ad models have been a little bit slower to get into those environments, in part because of measurability issues. … But at the end of the day, the 50-inch screen in your living room has to be the place where people engage with premium content in an ad-supported environment.”

Unsurprisingly, people tend to watch longer content and have longer viewing sessions on over-the-top devices. They also watch more live content there: OTT devices account for 37 percent of live viewing volume, but just 8 percent of all digital video viewing.

“One day we’re all expecting that [over-the-top] devices will drive the lion’s share of the growth,” said Dutt.

Ad views by content duration
(Source: FreeWheel Video Monetization Report Q4 2014)

Homepage image courtesy of Robyn Beck / AFP / Getty Images

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