Future of TV Briefing: FAST channel operators have hit a breaking point with streaming platforms

Illustration of two TVs playing tug-of-war.

This Future of TV Briefing covers the latest in streaming and TV for Digiday+ members and is distributed over email every Wednesday at 10 a.m. ET. More from the series →

This week’s Future of TV Briefing dives into the fraying relations between free, ad-supported streaming TV platforms and channel operators. 

  • The FASTs and the furious
  • CNN’s CEO isn’t ready for his closeup, Directors Guild averts a strike, women’s sports rise in value, TV ad sellers settle suit and more

The FASTs and the furious

The key hits:

  • FAST channel operators are frustrated by platforms’ limits on channels’ ad sales.
  • Samsung TV Plus is pushing for more control over channels’ ad inventory.
  • While Pluto TV and The Roku Channel primarily operate under revenue-sharing agreements, they are starting to open up to letting some channels sell their own inventory.

“Every content provider’s in a fight with Samsung.” 

That’s what one streaming executive told me recently about the state of the free, ad-supported streaming TV market. However, after talking with several more FAST channel operators, that statement isn’t entirely true. To be clear, many FAST channel operators seem to be in a fight with Samsung. But some are also butting up against Amazon’s Freevee or Roku’s The Roku Channel or Paramount’s Pluto TV or [insert FAST platform].

So it may be more apt to say: Every content provider’s in a fight with at least one of the FAST platforms.

The media companies operating 24/7 streaming channels on FAST services are fed up with the platforms’ heavy-handed control over channels’ ad sales as new channels are created and existing distribution deals — which are typically under one- or two-year terms — come up for renewal, according to interviews with executives at media companies operating FAST channels.

“I feel like we go through this every year, and it gets worse and worse and worse. And the funniest part is I don’t really know that [the platforms] know what they’re trying to do other than get more inventory,” said one channel operator.

“Here’s what I think happened,” said a second channel operator. The FAST platforms “were trying to woo us over and were being much more flexible [initially] to get our content because they know how valuable it is. Then once they had the content and built audiences off our backs, they became walled garden assholes that won’t share and think they should rule the world.”

Among FAST channel operators, the frustrations primarily concern opportunities to sell their channels’ ad inventory. Some FAST platforms do not allow channel operators to sell their inventory, while others are limiting the share of inventory that channel operators can sell.

Additionally, the FAST platforms provided limited information to operators about how their channels are performing, such as detailed audience breakdowns and reporting on fill rates for platforms’ share of ad inventory, as well as curtailing data like device IDs from being passed to operators that use that for ad measurement and attribution purposes. The lack of performance insights can make it hard for channel operators to know how best to program their channels in order to drive viewership. That information can also be useful when it comes time to renegotiate distribution deals as well as to avoid the risk of channels being removed given that platforms typically include language in distribution deals providing them the right to remove channels at the platforms’ discretion.

“We have no idea what performs, when it performs, who it performs with. It’s not really geared to help us become better,” said a third channel operator.

The situation with Samsung

Samsung TV Plus seems to be the prime example of the fractious nature of FAST distribution dealings. The smart TV maker has been pressing some FAST channel operators to divert all of their channels’ inventory made available on the programmatic open market to be sold through Samsung, which is developing a supply-side platform.

“They’re trying to take back 100% of the inventory. They won’t let anybody sell programmatic,” said a fourth channel operator.

“They put verbiage in our carriage agreement not to allow any programmatic sales of our inventory,” said the first channel operator.

Samsung is a main source of channel operators’ angst because it’s a major source of their FAST channels’ viewership. Some of the executives said that Samsung TV Plus accounts for more than 50% of viewership among FAST platforms for some of their channels. “It’s the 800-pound gorilla,” said the second channel operator.

A Samsung spokesperson provided a statement that said Samsung TV Plus provides distribution “for leading and independent content studios alike” to reach audiences globally but did not directly address the channel operators’ complaints. “Samsung aims to create a mutually beneficial environment for channel operators and content licensors to reach consumers through Samsung TV Plus, the #1 FAST platform on Samsung Smart TVs,” the statement read.

Railing against revenue-sharing

Although much of channel operators’ ire is being directed at Samsung, not all is — not at all.

For starters, some channel operators cited Samsung as a platform with which they have good relations and continue to enjoy a 50-50 inventory split. By contrast, these operators cited Amazon’s Freevee and Roku’s The Roku Channel as their main antagonists. In those cases, the operators’ distribution deals prevent them from selling any of their channels’ inventory and resign them to receiving a share of revenue from ads sold by the platform, ranging from 30% to 45%. Fox’s Tubi and NBCUniversal’s Peacock — which is a subscription-based service but carries FAST channels — were also cited for having revenue-sharing arrangements.

Spokespeople for Roku and Peacock declined to comment. Spokespeople for Freevee and Tubi did not provide comments by press time.

“Our viewership has been heightening on Roku, and our revenue has been going down because Roku won’t let us sell. The content owners have much more value in selling because we can sell against contextual relevance,” said the fourth channel operator.

The issue with revenue-sharing arrangements, including Samsung’s push to control channels’ programmatic ad sales, is that channel operators believe the FAST platforms do not drive enough revenue for the channels compared to what the operators could generate by selling the inventory themselves.

The FAST platforms typically sell ads across channels versus pitching advertisers on individual channels, and the CPMs they secure typically range from $10 to $20. “But we’re selling upwards of $60 [CPMs] on the same ad unit,” said a fifth channel operator. “It’s a really hard pill to swallow when that’s happening because we need to have margin on not just the content but the distribution, the inventory specifically, in order for us to be able to operate.”

The messy outlook

And then, because nothing about this situation seems straightforward, some channel operators said the situation is actually improving with The Roku Channel and Paramount’s Pluto TV, which had previously been a top agitator. In Roku’s case, the platform has started to discuss the option with some operators to effectively buy back their channels’ ad inventory in order to sell to advertisers themselves through programmatic guaranteed and direct deals. Meanwhile, Pluto TV is talking with channel operators about agreeing to split inventory. A spokesperson for Pluto TV did not provide a comment by press time.

As indicated above, the ad sales arrangements vary by platform, and even within a given platform, the terms can differ between individual channel operators. The divergence in distribution deals is leading some channel operators to press for standard deal terms, such as minimum revenue guarantees for revenue-sharing deals and agreed-upon price floors for inventory split arrangements. 

“If you want to take 100% of my inventory, give me some kind of guarantee. If you’re saying you’re so damn good that you want the ability to do this and we should be happy with a check, then either fill it at a very high fill rate and a respectable CPM or give me a second look at our inventory or at least an opportunity to fill,” said the second channel operator. This person added, “I’m not sure the economics — the way they are today with somebody taking their inventory and not doing a very good job of monetizing it — will support the industry.” 

What we’ve heard

“I’m not sure the DGA getting to a deal actually solves the issues for the WGA and SAG. I think it will help, but I don’t think it’s going to be — everybody always in the past would be like, ‘Great. DGA’s done; everything else will fall in line.’ It’s not feeling overly positive that’s going to be the same result here. I think we’re in for a bit of time on this.”

Project X Entertainment co-CEO Paul Neinstein on the Digiday Podcast

Numbers to know

70%: Percentage share of HBO Max subscribers who migrated to Max in its first week.

$25.99: Monthly price for a bundled subscription to Netflix and Paramount+ With Showtime through Verizon’s +play program.

-3.1%: Estimated percentage decline year over year in TV ad spend in 2023.

$100 million: How much money video-related generative AI startup Runway raised in a funding round whose participants included YouTube parent Google.

What we’ve covered

Project X Entertainment’s Paul Neinstein breaks down the writers’ strike and its implications for Hollywood productions:

  • Streaming residuals are a central issue for the Writers Guild of America.
  • Project X Entertainment is already planning contingencies for further production disruptions.

Listen to the latest Digiday Podcast here.

Short-form video boom fuels brands’ embrace of longer-form content:

  • Brands like PrettyLittleThing that had prioritized TikTok are now ramping up their YouTube presences.
  • Bose is similarly creating longer branded videos that range from five to 25 minutes long.

Read more about brands’ long-form video strategies here.

How gamers’ engagement with short-form video is changing:

  • Gaming creators are adopting TikTok and YouTube shorts.
  • Short-form videos account for a larger share of smaller creators’ views than for bigger creators.

Read more about gamers’ short-form video strategies here.

Inside SAG-AFTRA’s new deal with video platform Cameo:

  • Performers can receive union coverage through the celebrity video message platform.
  • The agreement also supports Cameo-driven deals between SAG-AFTRA members and brands.

Read more about Cameo here.

What we’re reading

CNN’s CEO isn’t ready for his close-up:

Chris Licht’s tenure atop CNN has been marred from the start, but it reached a new low last week after The Atlantic published an in-depth feature that reported on how detached the news network’s chief is from its newsroom (literally and figuratively).

Directors Guild averts a strike:

The Directors Guild of America has reached an agreement with film and TV studios, marking the first of the Hollywood unions to successfully negotiate a new contract, according to The New York Times.

Women’s sports rise in value:

The rights to air women’s sports, including the college basketball championship tournament and the WNBA, are increasing in price as viewership and advertiser interest have increased, according to Bloomberg.

TV ad sellers settle price-fixing lawsuit:

CBS, Cox Media Group and Fox will pay $48 million to settle a suit against the companies for allegedly sharing information in order to control broadcast TV ad prices in violation of antitrust law, according to The Hollywood Reporter.

Telly makes a play for free, ad-supported TV owners:

Telly has attracted 250,000 to sign up to receive one of its TVs that will be given for free in exchange for being able to collect audiences’ data and share it with advertisers — and for tolerating the eyesore of a second screen largely dedicated to displaying ads — according to The Verge.

https://digiday.com/?p=506361

More in Future of TV

Future of TV Briefing: Sneak peek at ‘The Future of TV’ video series

This week’s Future of TV Briefing looks at the upcoming “The Future of TV” video series, which will debut next week and explore the state of the streaming ad industry.

Digiday+ Research: A guide to ad-supported streaming services, from the top platforms to marketing spend

The first installment of Digiday’s two-part series on the top ad-supported streaming services provides an overview of the platforms’ offerings and an analysis of how brands and agencies distribute their ad budgets and ad placements across platforms.

Future of TV Briefing: Media Rating Council identifies ‘the problem of our time’ for measurement

This week’s Future of TV Briefing looks at how the industry’s measurement arbiter is looking at ensuring measurement systems are able to reliably identify audiences across channels in a privacy-compliant manner.