6 ways OTT is shaking up the TV landscape from nudity to new ads

The way people are watching TV has changed with over-the-top viewing that bypasses traditional cable, but advertising has not quite caught up. Brands are still stuck in a 15- and 30-second commercial mindset.

Companies like CBS, Viacom and Hulu are hoping to fix that, however, enticing advertisers to update their strategies in the age of on-demand video and streaming TV.

“We need to educate and inform marketers that it’s worth the effort,” says Peter Naylor, head of ad sales at Hulu. “The juice is worth the squeeze.”

Naylor was speaking at Ad Age's Next" OTT conference in New York this week, where a group of industry veterans from traditional networks and streaming startups gathered to discuss the future of TV advertising. CBS, Viacom, Tubi, FuboTV, Philo and PlutoTV were among the attendees discussing how the industry is coping with all the changes. Here’s what we learned:

With broadcasters competing with Netflix and HBO, the temptation to offer more adult content is obvious. CBS even flirted with introducing nudity into shows like “The Good Fight,” the spin-off of "The Good Wife," which was just renewed for a fourth season, according to Michelle King, writer of the show.

When the show streams on the CBS All Access app, it is outside the purview of federal broadcasting standards. But it turns out, just because writers have more freedom, doesn’t mean they needed to take the clothes off. “We thought we would be doing more nudity,” King says. “We realized that’s actually not our show and it doesn’t feel comfortable.”

CBS has identified local as the next major growth area for over-the-top TV, where there is a dearth of programming catering to the regional markets, according to Marc DeBevoise, chief operating officer at CBS Interactive. For instance, CBS News Los Angeles will be rolling out soon, DeBevoise says. “There aren’t a lot of local OTT products you can get,” DeBevoise says.

Ad-supported streaming is a challenge because there are fewer ads, DeBevoise says. On CBS All Access, for instance, which offers the same programs a viewer finds on broadcast, the ad load is 25 percent lighter than TV.

CBS is trying to craft more substantial deals to make up for the fewer ads, like when it got Geico to sponsor the streaming premiere of “The Twilight Zone,” in exchange for offering the show without any commercials interruptions other than a message from the insurance company.

“The bigger struggle is finding advertisers that are willing to do different things,” DeBevoise says. “Most of them want to use their 15 and their 30 [second commercials].”

The streaming service, with 25 million subscribers, has a similar problem trying to get brands to loosen up. The majority of Hulu ads are still 15- and 30-second commercials, according to Naylor.

The company is coming up with new formats it hopes will get marketers to think more creatively, like “pause” ads, which pop up when a viewer stops the show. Naylor says there are sponsorship opportunities that Hulu terms “situational” advertising and potential ad formats for binge watchers and catch-up viewers.

For instance, people could be in the middle of a binge-watching session and receive a message from a sponsor offering to show the next episode commercial-free.

Hulu expects a lot of viewers to catch up with “Veronica Mars,” for example, a show that first aired in 2004 that is now getting a new run as a Hulu original. Fans called “Marshmallows” can watch all the past seasons on Hulu before the reboot. “That’s the perfect example of a situation where we know people are catching up viewing,” Naylor says. “A sponsor should be in there.”

It’s not just the big players trying to crack the ad-supported video market. Tubi, FuboTV, Philo and Xumo all offer over-the-top streaming TV and movies.

“If it’s a two-syllable company and a vowel, it must be OTT,” joked Mark Rotblat, chief revenue officer at Tubi.

These digital TV companies are all looking to fill a void in the market with their ad-supported models. Rotblat says that viewers will only pay for two premium subscription apps on average, like Netflix, Amazon Prime and HBO Go.

“Where are they going to get the content beside ‘Game of Thrones’ and other premium originals,” Rotblat says. “They’re going to go to free ad-supported places.”

This year, Viacom bought Pluto TV so it could have its own OTT platform to stream shows from its networks like MTV and Comedy Central. Pluto is an experiment in linear viewing, providing its 15 million subscribers a platform that mimics cable while being delivered through the internet. 

Viewers still flip--or scroll rather--through channels with the lineup of shows curated for them, a departure from the growing interest in on-demand viewing where people watch content on their own schedule. “Linear is not dying by any means,” says Tom Ryan, CEO of Pluto TV.

Viacom plans  to launch 15 channels on Pluto, says Tom Gorke, exec VP and head of distribution and business development at Viacom. “We want to make sure that we’re doing this in a way that isn’t a substitute for pay TV distributors,” he says.