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  • Writer's pictureLeander Carell

4 Reasons Why Controlling an AVOD Business is Essential for Telecom Operators

Updated: Jul 28, 2023

a man standing in a dry field with a tv screen instead of his a face

In October last year, we were putting our heads together with our partners Microsoft and SES to discuss the new content monetization battlefield between Operators and Broadcasters and how Server-side Ad-Insertion plays a major role here. The ongoing Covid 19 pandemic, stay-at-home orders, and an economic recession have made free streaming services particularly appealing and even intensified the fight for eyeballs in the TV and streaming industry. With an increasing amount of SVOD services entering the market and subscription fatigue on the user side, advertising-based monetization models especially around FAST channels seem to take over the "Most Valued Player" position in the game now. The density of the current SVOD market is high and new entries like Discovery+ and Paramount+ will make it an even more cluttered battlefield of streaming services. NBCUniversal’s newest offering Peacock for example does have the reach, content, and profile to disrupt this area, which could further boost usage of ad-based and freemium OTT among households. Fox Corporation CFO Steve Tomsic recently said that the company expects the revenues of its ad-supported streaming service Tubi to surpass those of its broadcast networks in the next two to three years. Ad revenues across the five major ad-supported streaming platforms - Roku, Hulu, Peacock, Pluto TV, and Tubi - jumped 31% YoY in Q2 2020 to $849 million (Source). Ad-supported services will establish a large role within today’s video consumption space as consumers look for affordable entertainment options in exchange for their attention and data. This development does not go undetected by Telco Operators and Broadcasters, who try to stay ahead of their competitors by leveraging information about their subscribers and viewers.

a baby and a dog fighting for a dog bowl full of food

Historically in traditional DVB delivery, broadcasters have controlled access to their programs without any disrupter in between. The invention of HbbTV still aims to sell more value-added services, pull the viewer deeper into their program world and finally turn it into advertisement Euros.

But telecom operators have seen this coming and did not allow HbbTV signaling technologies such as AIT and Stream Events to pass their IPTV headends. They denied access to their millions of set-top box viewers in multicast networks by not supporting HbbTV-compatible browsers but launching their own multi-application environments to build future revenue streams.

Now, with the upcoming Server-Side Ad-Insertion (aka SSAI), broadcasters are fighting back covertly to regain control of the end-to-end delivery game and establish themselves as AVOD OTT networks. Operators worldwide are planning to shift from IPTV multicast to purely OTT within the next 2-3 years - assuming CDN PoPs can handle the required +30Tbps bandwidth, but with huge investments into 5G and fiber that will happen sooner than later. Unicast delivery will then be the new backbone for Server-Side Ad-Insertion. So now, broadcasters are forcing operators’ TV platforms using their own SSAI solution to take control of the end-to-end chain with direct access to the viewer and their devices.

this is how we win

However, an apparent win-win situation could quickly tip over into a lose-lose relationship. Many dependencies are never productive when business starts booming and course adjustments are necessary.

To understand the SSAI relevance it’s important to have a closer look into the workflow. An SSAI service is located between a CDN and the client device and becomes the new endpoint for delivering content and advertisement in the mix, for Live-Linear TV Catchup, nPRV, and overall VOD content. One could argue its task is limited to manifest manipulation, but it’s not. SSAI services need to provide more, it’s connecting the business dots between streaming- and ad networks and provides vast insights such as content popularity, ad performance, and viewer engagement captured from just one data stream. This is all valuable knowledge for a TV & VOD platform, not just controlling but optimizing their offering from a comprehensive perspective and driving their main goal, audience monetization. By giving this part away to the broadcasters’ SSAI the director becomes an actor.

you have no power here

The broadcaster wants to gain back control of its end-to-end delivery by baiting the platform with a treat, offering to take care of delivery costs. It’s an easy math who will gain more in the end. It is cents spend per gigabyte for content delivery vs. CPM income per ad view. While CDN delivery costs are commoditized, ad-CPMs in the addressable video segment are on the uprising scale, now more than ever after the Covid19 induced crash of the ad market. One hour of streaming is around one GB of traffic with optimized encoding settings. With current cost estimates, we are talking about 0,007 € per GB. In 1 hour of program, you can legally show 12 minutes of ads (German market). With an average of 20sec per spot, there is a potential output of 36 spots per hour. Assuming there is audience targeting in a brand-safe premium environment 25 € CPM per spot is a realistic amount advertisers and DSPs are willing to pay soon again. Multiply that with 36 spots and you end up with 900 € CPM, divided by 1000 for a single viewer. Quite optimistic, but that’s the potential a healthy ad market will offer. So, an average viewing hour per viewer in OTT can bring 0,90 € income from ads vs. 0,005 € costs for streaming delivery. Scaled to 1 million viewing hours per day and 500.000 subscribers, that’s a pretty decent margin business, right? The one in control of the SSAI will gain the most out of it - guess who is meant here.

ssai, operator and broadcaster: the new fight for owning the user relationship

The advantage of broadcasters is their long experience with market data from panels. Now it’s their aim to mix that knowledge base with audience segments collected from 1st and 3rd party data and other audience segment data. That's why they are so attracted by the operator's data.

But is the promised revenue from AVOD the Holy Grail for operators?

Even if millions are watching a show and the operator’s share is 30% in AVOD, which is already much higher than any share in TVOD, EST, and SVOD models (2-20%), that is not the decisive factor.


Here are 4 reasons why actually controlling an AVOD business is essential for Telecom operators:

1. The key strategic reason is to monetize customers through data, and this is driven by the operator's return path data from their STB and OTT devices and audience profiles. Each operator has millions of structured customer records and can profitably offer this information in pseudonymized form to its TV broadcasters and advertisers to promote content and services on the platform. The potential revenues could even exceed the revenues from the next three aspects in total.

2. Reduction of "churn" through addressed TV advertising for own products and services. TV advertising booked through agencies costs an operator millions of Euros. TV advertising on their own TV platform costs them cents. On the TV platform, the operator knows exactly whose mobile contract will end in 3 months. So why not show him or her personalized offers during the next commercial breaks instead of sending overused newsletters?

3. AVOD is Free(mium) and therefore a customer acquisition tool. Access to movies, series, and shows would be open to all and could not only mean more usage among existing customers but also encourage new customers to subscribe to additional new services of the operator.

4. Lower content licensing costs - By allowing TV broadcasters to market their inventory directly on the platform, the operator can even push licensing costs down to zero.


SSAI for TV and AVOD becomes the critical endpoint of operators’ Linear TV and VOD delivery system because they are going to deal with multiple interests from content providers, broadcasters and advertisers at the same time. That makes it essential for operators to control the SSAI workflow on their platform in a neutral way, pulling in the broadcaster’s own SSAI would be short-thought and risky.

Server-Side Ad-Insertion is primarily a streaming and delivery technology and thus a technical component of a TV platform. Therefore, the responsibility to manage the SSAI component lies with the operator.

In a broader sense, server-side ad insertion also forms the direct interface to ad sales. And the ad sales rights should remain with the broadcasters, as they hold the distribution rights and it is the main source of financing for their core business.

From a technical point of view, splitting and ad-routing, i.e. the distribution of advertising space, would of course be possible.

fred flintstones sitting on his armchair and turning on the tv

The main compromise is to be sought on both sides in the monetization, i.e. marketing of customer data: the customer and usage data belongs to the operators, but they make it available to the broadcasters in a pseudonymized form as audience segments and viewer profiles.

Both will benefit from better CPMs, i.e. premium ad sales prices due to the addressability and personalization of the advertising. But who is pulling the strings on the SSAI side? If your business success relies on profitable advertising, make sure it is you.

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