Wible's Weekly - Ratings Evolution, Digital Spots, and Digital Game Troubles - Janney/MediaEntertainment-Tony Wible

• Ratings Evolution – Nielsen is finally moving towards a system to measure viewing across digital and mobile platforms. We believe this move will push much more content to TV Everywhere and VOD platforms. While this should improve ratings for all companies, we see disproportionate benefit for VIA and programming geared towards a younger demographic. While they will measure OTT viewing it is not clear how this is relevant for those with no advertising and how it will work for programs with different ad loads. It's also not clear that this measurement is useful for some ad buyers given the potential for delayed ad viewing on the digital platforms that undermines time sensitive placements (e.g. movie premieres). Nielsen expects to have the new tools and technology in place in nearly 23,000 homes before the start of the new broadcast season. Ratings for OTT services such as NFLX are not included and would require NFLX to add code to their signals in order for Nielsen to pick it up.
• Digital Troubles? – Valve recently announced broad layoffs including reductions at Steam - the industry's leading traditional video game download platform. The layoffs were extensive and include individuals supporting hardware development. While the CEO maintains these changes will not shift their strategic focus, one does need to question the future of Steam Box, the console-like digital platform, and the broader health of Steam, which could be suffering with the rest of the game industry as it copes with a dearth of titles.
• Online Video – AOL is completing its transformation into an online video destination. The company's traffic has ranked second to YouTube, which has traditionally focused on user-generated content. AOL currently streams 700 million videos a month to over 42 million unique viewers, according to AOL executives. Similar to MVPD's or OTT providers, AOL has struck content deals with networks, including the BBC, Discovery and Martha Stewart, and is looking to bring more TV brands in. We believe these trends imply increased viewership fragmentation as more high quality content becomes available outside of the TV ecosystem. Conversely, online success can sometimes generate interest from networks to distribute shows via traditional TV: AOL Auto's Translogic will be aired on NWSA's Speed channel this year.
• Video Advertising – Longer-form video is likely to support a higher ad load with higher completion rates according to monetization firm FreeWheel. The largest increase in ad load came in the longer form (>20 minutes) videos, which increased to 9.4 ads/video (+36% YoY), vs 4% for mid-form (5-20 minutes) and 22% for short form (<5 minutes). Viewers clearly value the long form content the most, with a 93% completion ratio, compared to 81% and 68% for mid-form and short-form videos, respectively. Ad completion increased for all three categories, indicating that advertisers are fine-tuning their video strategy and convincing viewers to watch ad content from start to finish.
• Mobile Ads – Mobile advertising is set to expand further, as the number of advertising options increases. With newer phone technologies, tools and ad formats, advertisers can now more effectively leverage location and context data to target consumers. Mobile marketing is expected to exceed $2 billion in 2013, according to eMarketer. Demand for mobile video ads is increasing with mobile video consumption; 58% of mobile users prefer ad-supported video content over subscriptions or pay-per-view. While ease of use, scalability, and targeting capabilities drive format choice, pricing depends on available inventory with brands paying premiums to deliver immersive mobile experiences with rich media.

Tony Wible joined Janney Montgomery Scott in 2008 and is a Managing Director covering the Media and Entertainment sector after spending the previous 10 years at Citigroup Investment Research—most recently covering the Broadcasting and Entertainment Services industries.
Tony can be reached at twible@janney.com.

Janney Montgomery Scott LLC, is a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the New York Stock Exchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corp. Disclosures may be reviewed at Wible's Weekly.

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