Unlocking Set-top Box Data

What is a set-top box?

A set-top box (STB) is an information device that enables content from a cable or satellite signal to be displayed on a television. Nearly every cable operator-provided STB in the U.S. is leased to the subscribing household, representing an estimated $19.5 billion revenue stream for cable multiple-system operators (MSO) every year. The term “STB” generally refers to the box that delivers linear television to a home and does not encompass internet-based, over-the-top devices like Roku, Apple TV, Amazon Fire TV and Google Chrome. However, recent developments in technology and government regulations may expand the traditional STBs capabilities to gather information across all content delivered through online and linear platforms.

What is set-top box data?

STB data is second by second viewership information collected in more than 40 million households nationwide through operators such as Cablevision, DirecTV, Dish Network, Comcast, Time Warner Cable and AT&T Uverse. Rentrak and Kantar audience measurement data represents actual television viewership collected through partnerships with these participating providers’ STBs.

Though STB data has been actively collected for quite some time, linking the information with third-party data has only become available in the past decade. Furthermore, as recently as 2011, STB penetration was only at a third of what it is today, limiting the ability to effectively target audiences at scale. As of February 2016, U.S. STB ownership had reached 64 percent (up from 45 percent in 2012) and time-shifted viewing using a DVR constitutes an increasingly large percentage of overall television viewing hours. Currently, more than 60 percent of all time-shifted television viewing is performed through a STB rather than via online programming outlets, representing a major increase in the STB market. All of these new data capabilities have culminated into one important advancement: addressable TV ads, or the capability to serve unique TV spots to select audiences by household.

Why is the set-top box a powerful advertising tool?

Instead of using rating projections and aggregating estimated behaviors across target groups, STB data allows for a more granular understanding of actual TV usage behaviors. Targeting can go beyond gender and age, and mirror digital advertising segmentations more closely. The utilization of STB data puts TV and digital on more comparable ground when it comes to one-to-one messaging delivery. This is because addressable TV ads can be served to households based on programming preferences, shopping habits, presence of children and recent purchases, among many other filters. Though addressable TV is usually purchased at a premium and isn’t always the right fit for more general market advertisers looking for scale, data availability beyond basic demographic information is certainly changing the TV advertising marketplace.

It is generally believed that the improvement of addressable TV over the last five years has put television in a much better position to retain its hold on ad dollars due to two very important distinctions between TV and digital.

First, TV can more easily supply scale in premium environments. Dramatic fragmentation across the internet prevents advertisers from finding mass audiences without the power of programmatic buying. TV can still command massive scale in a single program or daypart.

Second, TV has none of the viewability or fraud issues that digital platforms are currently battling. Advertisers can rest assured that, barring bathroom and snack breaks, live viewers are seeing every ad served to their household.

Though addressable seems like a quick stop on the highway toward an entirely digitally-delivered television ecosystem, it is a crucial development in the linear TV world. Utilizing STB data and giving advertisers a deeper understanding of TV audiences will ensure television ad dollars continue to flow despite an increasingly fragmented, multi-platform environment.

What is the future of the set-top box?

The linear TV data collection power of set-top boxes is undeniably valuable and has thus far fallen under the ownership of cable companies and content producers. Cable companies and the intricate relationships each cable provider has arranged with content producers, networks and the entertainment industry have set the standards by which consumers access content and the cost advertisers pay to run in content. However, a recent Federal Communications Commission (FCC) regulation initiative called “Unlock the Box” is going to change all of that. In an effort to increase consumer choice and open the television technology market for competition, the FCC has voted to release STB production from the closely-guarded realm of cable and content providers into the mass technology market.

In recent years, improving the STB and investing millions into technology upgrades have been essential enhancements as Comcast, Cablevision, Time Warner and others compete for customers. STBs have received some major, and long overdue upgrades in the last year. However, the effort may have been too little too late as they face an open market challenge. Since competing for superior STB technology has been a relatively new facet of cable provider offerings and recent investment has been dramatic, cable companies are very concerned that they will lose a major brand differentiator if universal STBs can be used with any cable provider. The universal box threatens to place cable operators in the same category as telecom providers that work with any cell phones and serve merely as the conduit for mobile phone service.

Technology companies, including Google and TiVo, have vested interests in seeing the success of the FCC’s new regulations. Opening the STB marketplace to vendors outside the cable MSO marketplace will allow consumers to purchase other technology offerings. The open marketplace also allows “outside” companies access to programming and content that previously was closely-guarded in the cable and broadcast ecosystems. Owning the box through which all content flows, as well as all data regarding household TV usage, has been cable’s major ace in the hole. Allowing outside companies access will threaten their power position.

On the content side, joint agreements between cable providers and content producers have served to limit “no holds barred” access to cross-platform content. Carefully curating new content and monitoring online and offline demand has helped content producers maintain their profit margins and has preserved a mostly synergistic relationship with cable providers. So with these new developments, Viacom, Time Warner, Disney and other major content producers are extremely concerned about their long-term contracts with cable providers and what will happen to their deals when other vendors like Google enter the TV business.

Additionally, minority advocate groups argue that unlocking the box will be detrimental for minority-produced and targeted content, likely requiring consumers to purchase niche programming on an a la carte basis. The added cost would be unfair to consumers unable to afford the programming created to uniquely target them. Further, if minority content producers are required to monetize their offerings against these smaller audiences when presented on a multi-platform video offering through Google or Amazon, it would likely put sustainable profits out of reach. Advocate groups believe the current cable ecosystem allows large and small networks alike to survive through the bundled subscription. If all programs are valued on the basis of the size and buying power of their audiences as stand-alone entities, some content will not survive.

So how will advertising be affected by an open set-top box marketplace?

Ad possibilities will be more fragmented as a result of open STB technology. It is highly probable that advertisers will be able to purchase time through cable providers as well as the individual STB manufacturers. This may make for more complicated media strategies and buy negotiations, but may also encourage consumers to increase cross-platform viewing. Technology developers outside of the cable provider category will definitely offer holistic recommendation engines including online and linear video programming, accessible through traditional TVs. Opening the marketplace may be a scary proposition for cable providers potentially threatened by new competition from Google, Amazon, TiVo and others, but it could mean more options and convenient viewing experiences for consumers.

Set-Top Box Truths & Myths:

Truth: One third of U.S. households can be reached across the STB operators. Of the 116 million U.S. households, 35 percent have Addressable TV capabilities. In addition, the national geographical distribution of addressable households closely matches that of linear TV households.

Myth: The same data can be accessed across all STB operators. Data quality is still a concern as standardization across STB operators does not exist. This could mean different definitions for impressions (i.e., 10 second dwell time versus 20 seconds) to different rules to pair STB data with household data. The result is varying definitions for campaign parameters, accountability and measurement.

Truth: STB data includes TV networks that are not currently reported. STB data provides second-by-second viewership activity on networks that are not always measured by Nielsen. It is estimated that this long-tail inventory equates to 40 percent of cable viewing due to smaller networks not meeting minimum Nielsen reporting standards.

Myth: STB data is representative of the total U.S. population’s viewing habits. While STB data does represent actual STB usage, gaps exist. For example, there is only algorithmic differentiation between actual viewership and data collected from STBs being left on despite TVs being turned off. In addition, STB data does not include non-cable, non-satellite and over-the-air homes, which represent 10 to 15 percent of TV households.

Truth: A wide range of data points are available to better define strategic targets. STB data allows for targeting far beyond what is available within linear TV. By utilizing STB data, target audiences can be defined using hundreds of different factors such as pet ownership, hobbies, or even exercise habits of household members.

Myth: Hyper-circumscribed addressable TV targets can be reached in mass. The addressable audience “size of prize” must be considered when defining audiences. Including numerous or overly discriminative factors can result in too small of an audience base to permit measurable results.

Truth: Addressable TV has the ability to eliminate unwanted and wasteful impressions. Addressable TV will only deliver television messages to households that contain the advertiser’s strategic target audience. This audience will be defined via precise data points not available through standard Nielsen demographics.

Myth: Addressable TV guarantees the defined target receives each impression. Since data is available on a household level and not an individual level, STBs can only show that someone in the household is the target, but not necessarily who that person is. This factor is compounded further when targeting people with larger families or household member size.