What Is Connected TV? Understanding the Basics

Lori Goode, Chief marketing officer
What is connected TV (CTV)? And what opportunities has its accelerated growth created for marketers and media owners? In this video, Lori Goode, CMO at Index, explains some of the common terminology and concepts in streaming TV.

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What is connected TV? 

With soaring viewership and increased investment from marketers, streaming and connected TV is the media industry’s latest success story. In fact, 83% of households in the US are now CTV-enabled, with similar growth following quickly in Europe and APAC.  

So exactly what is connected TV? Simply put, a connected television has access to the internet to stream digital content. Connected TVs include smart TVs with a built-in internet connection, as well as standard TVs that connect to the internet via devices like streaming sticks or gaming consoles.  

CTV vs. OTT 

You may have also heard the term OTT. While CTV evolved into the most commonly used term for streaming, there is a distinction between the two. 

Over-the-top television, or OTT, is the delivery mechanism for broadcast-quality online video content, usually through streaming or video-on-demand services. Content is delivered “over the top of” traditional network providers. Today, OTT is most often simply referred to as streaming TV.  

If you’re watching Netflix on your phone, you’re streaming OTT content. Later, when you watch Netflix through your TV, you’re streaming OTT content over CTV. 

This is in contrast to what’s commonly referred to as linear TV, or the traditional method of broadcasting content at a set time via cable and satellite TV providers.  

What is the difference between SVOD, AVOD, TVOD, and FAST? 

The adoption of CTV has led to an increase in cord-cutting as consumers sever ties with traditional cable and satellite companies. Streaming services offer more flexibility and control, and today, consumers have many options for accessing content, including SVOD, AVOD, TVOD, and FAST services.  

Let’s break down each of these acronyms:  

  • Subscription video-on-demand (SVOD) services, like Netflix and Apple TV+, offer an ad-free, flat-rate subscription service with unlimited on-demand access to content.  
  • Advertising-based video-on-demand (AVOD) services, like Peacock or Paramount+, offer a lower-cost or free on-demand streaming option for viewers in exchange for regular ad breaks.     
  • Next we have transactional video on demand (TVOD). Whereas SVOD services allow viewers to consume as much media as they desire, TVOD services, like Apple iTunes or Amazon’s Prime Video store, provide content on a pay-per-view basis for viewers to rent or purchase a specific piece of content.  
  • Free ad-supported streaming (FAST) services, such as Tubi and PlutoTV, are another free option for consumers. Programs are only available at set times and include regular ad breaks, much like linear TV.  

The streaming TV landscape 

With all of these different streaming options, you can see just how many channels are available for distributing content to consumers.  

A media company like Warner Brothers Discovery can produce a TV show or movie, making them the owner of the content. They can then choose their preferred distribution stream, or streams, to get that content in front of viewers. This could include: 

  • Their owned and operated app, like HBO Max; 
  • A specific device manufacturer, like Samsung or Roku, which offer their own FAST channels; or 
  • Another distributor that Warner Brothers Discovery does not own or operate, like Tubi TV or Netflix. 

This has led to a huge selection of apps and devices that hold exclusive content, compelling consumers to subscribe to a wider range of services. As streaming providers expanded their content libraries, subscription prices also grew. We’ve now reached an inflection point where consumers have maxed out the number of subscriptions they’re willing to pay for.  

This makes ad-supported content a necessary and massive opportunity. In fact, ad-supported streaming increased by 29% between 2020 and 2022, totaling 77.7M US households, compared to non-ad-supported streaming, which grew more slowly, at 21%. 

Consumers are more willing to switch to ad-supported tiers to continue accessing the content they want while balancing costs. And for streaming services, lower-cost ad tiers offer a way to reduce subscriber churn while introducing another revenue stream to offset the cost of acquiring or producing new content. We’ve seen this in action with the likes of Netflix and Disney opening their platforms to advertising and adding AVOD options. 

However, this fragmentation has made it challenging for marketers to reach their desired audiences and manage frequency through coordinated CTV buys, as several parties may own ad sales rights to the same content.  

Programmatic CTV provides the opportunity to address this fragmentation by introducing automation to TV. 

The programmatic CTV opportunity 

Consumers have high expectations for the CTV viewing experience, including advertising. Programmatic technology allows marketers to activate data-driven campaigns and reach a specific audience with a relevant message—and relevant ads lead to a better, less-intrusive viewer experience. 

Programmatic CTV is also breaking down the barrier of large upfront TV budgets and allows for a greater range of brands to invest in the big screen.  

Finally, programmatic CTV allows marketers to be more nimble compared to linear TV. It expedites the time needed to activate a campaign and allows marketers to continually optimise against key performance metrics, while gaining incremental reach across traditional TV buys. 

This landscape can feel complex, so we hope this has provided you with a solid foundation to connected TV. 

Next up in our Index Explains streaming TV series, we’re taking a closer look at the top issues media owners and marketers are facing in CTV today, including ad podding, transparency, and industry standards.

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