Delaware Valley business owners are expected to spend $524,032,000 on streaming video advertising in 2021, according to Borrell Associates, a company that tracks online marketing expenditures across the country. This spending will be 26.0% higher than in 2020.

Streaming video advertising expenditures are accelerating as Philadelphia area consumers continue to abandon shows on local TV stations and cable systems in favor of programming streamed via an internet connection. These online channels include Netflix, Hulu, Prime, Disney+, Paramount+, Peacock, Prime Video, Roku Channel, SlingTV, PlutoTV, and dozens more.

This type of streamed video content is known collectively as OTT (Over-The-Top-Television) or CTV (Connected-Television). These two terms are sometimes used interchangeably but do have a subtle difference.

OTT generally means the video is watched on a small device like a computer, tablet, or smartphone.  CTV, on the other hand, typically means the content is viewed on a smart-TV or a regular television using a streaming device like a Roku or Amazon stick.

In Philadelphia, according to Nielsen, OTT/CTV has exceeded the weekly reach of local newspapers and streaming audio services such as Pandora and Spotify. The medium is rapidly approaching the reach of local cable and broadcast TV stations.

Broadcast television came to the Delaware Valley in 1941 when WPTZ-TV (now KYW-TV) signed on for the first time. In those days, only about 0.5% of local households actually owned a set, a number that would grow 100-fold by the mid-1950s.

At first, Philadelphia consumers needed rabbit-ears or outdoor antennas to receive signals from a small handful of local stations, including  WCAU and WFIL (now WPVI). The quality of reception varied day-to-day.

By the early 1960s, however, local cable systems began to bring higher-quality, reliable reception to households throughout the Philadelphia area. The number of programming options, though, remained limited to affiliates of ABC, NBC, and CBS.

In 1972, viewing options began to expand as local cable began offering Philadelphia area consumers the opportunity to purchase premium services, including HBO, Showtime, and Cinemax.  Five years later came an explosion of non-premium cable channels such as TBS and CNN.

In the early 1990s, Philadelphia viewers could not only receive their television programming over-the-air or by cable, but options expanded to include satellite delivery by DishTV and DirectTV.

The next TV innovation came in 2007 as Philadelphia consumers started turning to the internet to watch streaming channels like Netflix and Hulu.  These new services allowed viewers to watch TV on their phones, computers, and tablets as well as their living room LCD and Plasma screens.

Today, all of this video technology offers viewers the ultimate flexibility to choose how, when, and where to watch TV.  So, what are they watching?

Before we explain AVOD, it is important to understand SVOD.

Delaware Valley small business owners may not be familiar with SVOD, but chances are they let it into their homes and onto their phones.

SVOD is the abbreviation for Subscription Video On Demand. That is the collective name for streaming networks like Netflix, Hulu, Disney+, and Amazon Prime.  For a monthly fee, these services provide commercial-free access to TV shows, original content, and movies.

These SVOD networks are delivered to viewers' phones, tablets, computers, and smart-TVs via the internet and not over-the-air or cable systems.

SVOD makes up a significant part of what advertisers refer to as OTT (Over-The-Top-Television) and CTV (Connected-Television). OTT/CTV is video-programming content that viewers can only watch on smartphones, tablets, computers, smart-TVs, Amazon Firesticks, and Roku Sticks.  Nielsen reports that 92.1% of Philadelphia area adults own at least one of these devices.

Advertising on Philadelphia television and cable is becoming less attractive to local business owners as viewers rapidly defect to alternative video entertainment sources including, Netflix, YouTube, Hulu, Amazon and Disney+.

Collectively these streaming services are referred to as Over-The-Top Television (OTT) and Connected-TV (CTV). Viewers can only access this OTT and CTV content via smartphone, tablets, computers, smart-TVs, Amazon Fire Sticks, and Roku Sticks, Nielsen reports that 92.1% of Delaware Valley adults own at least one these devices. Furthermore, they are using them.

According to Nielsen, OTT and CTV networks now reach 42.8% of all Philadelphia area consumers every week.

More than one-third of Delaware Valeey households are 'cord-cutters' or 'cord-nevers'. This means, they have fired their cable or satellite television providers or never subscribed at all. Instead, these consumers are choosing to find their video entertainment elsewhere.

The number of local homes that subscribe to pay-TV services began plummeting in 2013. New technologies has allowed viewers to bypass cable and satellite for more compelling content at lower prices. These cord-cutters now depend on services like Netflix, Hulu, Disney+, and Amazon Prime to fill their multiple screens.

For many years, Philadelphia small business owners have been investing a significant portion of their advertising budgets into cable-TV.  The medium had proven to be a low-cost, high-reach alternative to buying commercial on over-the-air television stations. 

Now, because of cord-cutting, there are 1.4 million adult consumers with unconnected TVs. This profoundly diminishes the value proposition of advertising with local cable systems.

There is a powerful and affordable solution, however, for small business owners to reach both the diminishing cable audience and the expanding number of cord-cutters.

Pay-TV is struggling to survive COVID-19.

Before the onset of the pandemic, Nielsen reported that 77% of Delaware Valley households received their television programs from cable systems, telephone companies, or satellite operators.  That number, however, is plummeting.

Pay-TV providers in the Philadelphia area include Xfinity, Fios, RCN, Hotwire, Dish, Spectrum, and DirecTV.

"Cord-cutting, people dropping their cable and satellite TV subscriptions, pre-dates the onset of Covid-19. But the pandemic is exaggerating the trend, creating deeper issuers for programming that relies on those services for distribution," Eric Savitz wrote last week in Barron's.  This includes non-premium services like ESPN, TBS, TNT, USA, CNN, and Discovery.

"LightShed Partners analyst Richard Greenfield counts a loss of 1.96 million subscribers to cable, satellite TV, and virtual cable services combined in the first quarter," Savitz continued. "This is the worst combined quarterly drop ever, down 6% from a year ago."

Greenfield said in an interview with Barron’s that what is especially sobering is that most of the first quarter activity pre-dated the virus. The numbers are likely to get considerably worse in the second quarter.