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Mobile Streaming Helping TV Business

6 Aug, 2014 By: Doug McPherson

NEW YORK – It turns out digital video viewing on mobile devices has actually helped the traditional TV business instead of hurting it.

A new report from Needham & Co. estimates that digital video advertising added about $2.5 billion to U.S. TV economics in 2013, and will do the same again this year. Needham says it’s all about the consumer shift of watching video on smartphones.

Nielsen says smartphone use is up from 48 minutes to 67 minutes per day (a 40-percent jump) during the past two years, while desktop use has remained flat at about one hour a day.

Laura Martin, a Needham analyst, says in the report: “Rapid growth of mobile devices is creating demand for short-form digital video content, which is fueling the growth of a parallel video ecosystem that, so far, appears to be additive.”

As an example, the report says World Cup streaming added 12 percent to TV audiences and 15 percent to economics for Univision. And 87 percent of its digital streaming traffic took place on portable devices, up from 37 percent in 2010.

Needham says that because ad revenue is calculated on a CPM basis, this implies that Univision generated 12 percent more revenue for streaming World Cup games on digital platforms. But because online audiences skew younger – and often are valued more highly by media buyers – this translates to a 15-percent gain.

But Needham warns that during the next decade, digital video will pose more of a threat to TV networks and cable companies.

While mobile viewing of TV content is translating into more revenue to the traditional TV model, it will add more to the new parallel digital video ecosystem because of shorter lengths that fit better into “new windows of time” created for watching outside the home. The report cites a surge in short-form programming (less than seven minutes), largely viewed on smartphones via YouTube.

“Although short-form video is poorly monetized today, disruption always begins at the low end and moves up over time,” the report says. “The biggest risk to the dominant dual-revenue stream model today is that the rise of digital video will lead to a single revenue stream – either from an OTT (over-the-top) subscription, or ad-driven Internet business.”

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