Your browser is not supported. Please update it.

16 June 2022

Monetization cloud hangs over FAST hyperscalers

“Beachfront real estate in a gladiator pit” was how one panelist described the growing landgrab surrounding FAST channels at this year’s OTT.X Fronts in LA. While the landscape is heating up, with vendors and distributor platforms looking to lock in emerging channels before competitors, the issue of sustainable monetization still looms large.

It seems every victory in this space is short-lived, with predators waiting around every corner to seize upon emerging channels before they become self-sufficient. Invest in content and you risk losing your returns via sharky distribution deals.

Jonathan Skogmo, CIO at Trusted Media Brands, spoke plainly about many of the struggles faced by an emerging OTT platform trying to break into prime real estate on a connected TV UI. Gone are the days of acquiring customers through mobile ads and then moving them to CTV.

“Cost per acquisition has rocketed. Roku now wants you to spend $250,000 a quarter on customer acquisition,” he lamented.

This does not seem to bother Skogmo too much, probably because Trusted Media Brands poaches its FAST content libraries from popular social media personalities and brands. Not only is this cheaper to acquire than traditional long-form content, but marketing budgets can be allocated exclusively to those platforms where the content originated from.

With costs spiraling upwards, FAST platforms are faced with a catch 22 – keep content budgets down to balance the books, or risk bankruptcy by spending large on big name titles that will do the marketing themselves. Faultline’s time at the OTT.X Fronts revealed that pretty much every AVoD or FAST platform has chosen the former strategy, although some are still in denial.

“We have to make the content undeniable,” said Jesse Baritz, VP of Content Acquisition and Development at Multicom Entertainment Group, which runs its own FAST service, The Archive, using content from its library of over 3,000 hours of movies and TV shows.

However, neither on the panel nor in our own private discussion, did Baritz namedrop any content that Faultline would deem “undeniable.” Baritz’s later contribution to the panel, that “two dimes are worth more than a dollar,” only served to confirm these feelings.

While few were arguing that FAST has smash hit titles, instead the champions of the format argued that FAST offers sharp and dynamic curatorial abilities that could raise CPM. Ben Lister, Senior Director of Content at Stirr, a Sinclair Broadcast Group-owned AVoD platform, notes that the introduction of personalized FAST channels has proved to be the most profitable advertising channel for content owners, even trumping their own channels on occasion.

It seems that any pay-offs from spending big on content create further problems down the line for emerging FAST services. Cinedigm’s CSO, Erick Opeka, notes that many of Cinedigm’s most successful FAST channels are single IP outlets such as The Bob Ross Channel.

While single IP can provide an endless resource for reliable programming, Opeka cautions that top brands rarely come for less than seven figures.

Cinedigm is now in a period of rapid scaling, which means that its CDN costs per hour are decreasing dramatically. “Vendors are fighting to have us as we scale,” Opeka beamed. However, this scale means that big distributors are looking to ringfence Cinedigm for exclusivity on their platform. “You can only scale so far before it comes back to bite you,” he told the panel.

In some ways, the panel seemed nostalgic for the simpler and higher-margin days of cable TV, a feeling we observe virtually on a daily basis right across the media and entertainment ecosystem.

“It was tough to enter, but once you had a carriage fee, you were in, keeping 90% of your revenue, and had a three to five year runway to work it all out,” Opeka recalled. “Now you have six months tops to prove yourself.”

“FAST has evolved from just blindly scheduling fallow content,” Opeka continued. “Now FAST networks are offering stacking and programming – it’s becoming a baby cable industry.”

Amid this bloodbath, FAST platforms are trying to create a softer landing pad for new channels. Lister claims Stirr tries to keep new partners afloat in their infancy, offering revenue share or inventory split models for new channel partners that make use of its vast ad-sales department.

Ensuring that the back-end is kept in order is also essential for low-cost marketing. Lister notes that ensuring all metadata is filled-in is essential for ensuring discoverability far beyond the CTV UI, with voice assistants and smart speakers also proving key portholes for customer acquisition.

Of course, this metadata kills several birds with one stone, as it is also essential for channel programming and campaign reporting. “Partners will often ask for title-level reporting when all they have given me is 100 hours of content in an AWS S3 bucket,” jibed Lister, who was met with chuckles around the audience.