TV networks beware: If you’re providing connected TV platforms with your OTT ad inventory for free, cable and satellite providers could use those arrangements to strong-arm you into providing them with a larger share of your linear TV ad inventory.

The key hits:

  • Amazon and Roku typically demand that OTT apps on their connected TV platforms provide the companies with 30% of the apps’ ad impressions for Amazon and Roku to sell on their own.
  • In their deals with cable and satellite TV providers to carry their channels, TV networks typically agree to provide the pay-TV providers with 12.5% of their ad inventory.
  • Pay-TV providers also pay TV networks for carrying their content, whereas Amazon and Roku do not.
  • TV networks’ contracts with pay-TV providers include a so-called “most favored nation” clause that restricts networks from providing more favorable terms to certain pay-TV providers without offering those terms to all providers.
  • Pay-TV providers could invoke the most favored nation clause to demand a share of TV networks’ linear inventory that would be equal to what they provide to connected TV platforms.
  • Some TV networks have addressed the issue by rejecting platforms’ inventory demands and are instead offering to sell them a share of their inventory.

The rise of connected TV is upending the traditional TV business in many ways, from siphoning viewers to threatening to steal advertisers’ dollars. But connected TV may also upset the distribution deals that TV networks strike with traditional pay-TV providers. There is a gray area regarding how networks allocate their OTT ad inventory to connected TV platforms that potentially creates an opening for pay-TV providers to demand a larger share of networks’ ad inventory.

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