With Disney’s acquisition of 21st Century Fox only just closed, Comcast is already well down the road plotting convergence of its operations with Sky, with greater clarity over where rationalization and therefore redundancies will occur. Naturally both parties are accentuating the positive and it is true that each has strengths in areas where the other is weaker, for example in addressable advertising and OTT platforms in Sky’s case, or voice control for Comcast. That is determining which party takes control of a given area.
The latest details outlined in two emails distributed to staff by Sky CEO Jeremy Darroch and Kevin MacLellan, NBC Universal (NBCU) chairman of global distribution and international, concern merger of channel operations and content distribution. This is the first development with direct implications for staff since it combines functions where there is some overlap, although precise redundancy numbers have yet to be announced.
In essence Sky is taking control of channel operations while content distribution is going to be consolidated under the NBCU brand. This means that NBCU’s UK pay TV channels, such as E!, Syfy and Universal TV, will be folded in with Sky’s broader portfolio of sports, movie and entertainment channels. The operation will then be based at Sky’s UK headquarters in Osterley HQ, where NBCU’s EMEA Networks team will be relocated. Similarly in Germany, Sky will become the parent company of NBCU’s Networks business there, with likely co-location at the Unterfoehring offices.
On the other hand Sky’s content arm Sky Vision will be incorporated into NBCUniversal’s global distribution business. The job losses will therefore be concentrated mostly on Sky Vision and NBCU Networks as the parties being consolidated, with the usual platitudes about supporting people affected through these changes.
There is better news though for staff on the production side, where mergers are not expected primarily because the strategy there is to beef up original content which is seen as the competitive foundation of the enlarged company. So Sky-owned independents such as Love Productions, Znak & Co and Sugar Films will remain in their stand-alone production and deficit financing division, while NBCU’s international operation will remain in charge of separate production entities, including Carnival and Working Title.
After content, addressable advertising is seen as the most important field for the combined outfit and a primary reason for Comcast’s acquisition of Sky. On this front consolidation is occurring because Sky is way ahead with its Ad Smart addressable advertising platform launched in the UK in January 2014. This was the first really successful proprietary advanced advertising platform allowing targeting within the linear service by demographic, location, time of day and personal interests, operating over the satellite platform by downloading ads direct to the Sky set top so that selected ones can be stitched in during ad breaks in live broadcasts in place of the standard national spots.
Comcast is now dropping the Sky branding so that the unit becomes just Ad Smart as it absorbs NBCUniversal’s ad-targeting service, Audience Solution. This may result in redundancies there but not many because advertising is seen as pivotal to success, with the aim of taking some of the business going towards YouTube and Facebook by trumpeting brand safety. Having ads appear against “unsuitable” content has been an issue with those platforms, which have of course responded with various mechanisms, such as Facebook giving advertisers visibility into which publishers their ads might appear on. But this still doesn’t cover rogue content publishers are unaware of and so Comcast believes there is an opportunity for combining the quality and reach of linear TV with the addressability that online platforms can offer.
Comcast has admitted its performance in the US advertising market has so far been lackluster, offering just standard fare to brands over its cable network, and has identified four areas where collaboration with Sky should score heavily. The first is merely by exploiting the much larger combined audience of over 50 million English speaking households in the US, UK and Ireland, using set top data to identify demographic segments. Second is the addressable TV itself, allowing targeting against VoD services operated by NBCU and Sky. Thirdly comes digital targeting, where advertisers can reach audiences in premium online content via websites and apps operated by NBCU and Sky. The fourth is the most intriguing, bringing in NBCU’s work on AI-based contextual advertising with media planning tools that match brand or product messaging with relevant scenes in the TV programming. Comcast describes this as “enhancing ad effectiveness and giving consumers a more organic viewing experience”.
Contextual advertising is already well established online and in the case of mobile has the additional ingredient of location. Comcast’s ambition is to transfer this both to linear and online TV including mobile so that the same benefits accrue to advertisers there. It is part of an overall goal to lighten the total advertising load, or amount of viewing time taken up, but making those ads that are shown highly relevant and desirable. There is now a growing body of focus group and survey feedback confirming that viewing experience improves while ad engagement increases as a result.
The other big zone of convergence is streaming, which in Comcast’s case is intimately related to advertising. Unlike its two big converged media rivals AT&T and Disney, Comcast is planning to make its forthcoming streaming service feeding off NBCU content ad supported and linked to pay TV subscriptions. Available in Comcast’s and Sky’s territories, that is the US, UK, Ireland, Germany, Austria and Italy, it is set for launch in 2020 and will be free for the 52 million customers of Comcast Cable and Sky pay TV, earning money through interactive advertising. It is true there will also be an ad-free premium version, but the main focus will be on building scale quickly on the back of the pay TV base to achieve critical mass for addressable advertising.
Whether this succeeds is another matter and we do not think it will, certainly not in the US where there is great antipathy to ads within on demand content and probably not in Europe either. At least there is then the ad free version to fall back on but viewing numbers for that will be lower in the shorter term.