Over the next several months, viewers are going to be more tempted than ever to cut the cord, thanks to a pair of anticipated new over-the-top (OTT), skinny bundle offerings from AT&T and Hulu.
Those two companies shared more details today about their upcoming services, targeting cord-cutters and cord-nevers, during an Advertising Week panel today about the future of OTT, moderated by Adweek TV and media editor Chris Ariens.
"The way people are watching, a la carte and on demand, is the way of the future," said Peter Naylor, Hulu's svp of advertising sales.
AT&T will launch its DirecTV-branded offering, DirecTV Now, later this year, as it tries to entice the 20 million households without a pay TV subscription. Subscribers will be able to stream more than 100 channels, without a long-term contract or any hardware like a set-top box, through their phones, tablets and connected TV devices like Roku.
"We had the opportunity to deliver this premium experience with a greater choice in flexibility," said Brad Bentley, evp of marketing, AT&T. "We have a chance to really customize and personalize the experience using data."
Given that AT&T already aggressively uses its set-top box data from cable and DirecTV for targeted advertising and to improve ROI for clients, the company is looking forward to the "individual addressability" opportunities that will be offered by DirecTV Now.
Hulu is also preparing its own skinny bundle of cable and network channels, which it will sell directly to consumers next year. "We're trying to take the best of what we like, and a generous dose of reinvention," said Naylor, adding that if the major content providers license their networks to most or all of these skinny bundle offerings, audiences will gravitate to the service with the best "user experience."
One of the newest OTT offerings is Time Inc.'s ad-supported People/Entertainment Weekly Network (PEN), which launched two weeks ago. Response so far has been "fantastic," said Bruce Gersh, svp, strategy and business development for Time Inc. "Our advertising partners have really responded well."
Last week, when People rushed to put out a second issue after news broke of Brad Pitt and Angelina Jolie's split, PEN fast-tracked an 18-minute video about the couple that launched last Friday, the same day the Jolie-Pitt issue hit stands. "It just shows that there's excitement about the brand and the access we have," said Gersh.
One draw of OTT offerings like Hulu is that they offer a reduced ad load vs. linear. "You can't mirror the ad load of a conventional TV experience and expect people to watch," said Naylor.
And one year after Hulu launched an ad-free tier, priced at $11.99 per month, Naylor reiterated that "the majority" of new Hulu subscribers continue to opt for the $7.99 per month option, with ads. "We had the single biggest year in advertising the same year we introduced an ad-free service," he said. "But people want to be able to get what they want."
Time Inc.'s service also has a reduced ad load, with one 60-second ad pod every 60 minutes. "Consumers are responding really well to that," said Gersh. "They're staying and they're watching."
With all those new and upcoming OTT options, breaking through the clutter is harder than ever before. Content is "a real differentiator when you're trying to turn the heads of viewers," said Naylor. "We're all looking for that piece of content" to draw audiences, like HBO's Game of Thrones or Netflix's House of Cards. Agreed Gersh, "we believe at the end of the day, great content and well-known brands are going to win."
Content is king, but being able to monetize that content is just as important. Nielsen's total audience measurement rollout, set to be released by March, should help, though Naylor noted that connected TV devices, which represent 70 percent of Hulu's viewing, "is the least established environment for measurement. It's no small trick to get measurement right in this environment."
As the OTT world expands in the coming months and years, the players know that it will take some time for everything to shake out. "We are all going to experience a lot of churn as people sample and figure out what their right mix is going to be," said Naylor.