How YouTube Became TV and Why $100 CPMs Are Next | Michael Beach, Screen Wars & State of the Screens

Big Questions On Streaming’s Future

Tim Rowe, State of Streaming 0:45

Will the future of streaming really command $100 CPMs? And is YouTube actually considered TV? Spoiler alert, the consumer settled that debate years ago. Welcome back to the State of Streaming podcast. I am joined today by Michael Beach of Cross Screen Media, the author of Screen Wars, the book, and the ongoing weekly Substack State of the Screens. We are breaking down convergent TV. We're exploring why local advertising holds the keys to the next billion dollar streaming exit. We're going to discuss what political ad spend can teach us about how to measure modern media. Before we get started, make sure to hit that subscribe button to catch all of our latest insights. Now, onto the interview.

What The Next Big Exit Looks Like

Tim Rowe, State of Streaming 1:41

Absolutely. You and I, last time we caught up, you'd outlined what the next billion-dollar company in streaming looks like. And I thought that would be a fun place to start for our audience. Can you can you bring us up to speed? The next billion-dollar streaming company, where are they coming from? What do they look like?

Speaker 1:58

Yeah, it's really interesting. Like you look at you know, even the last decade in kind of the broader ad tech area, and definitely now as we're getting to focus on video, but the best exits from that area have been companies like, you know, recently we had Vibe, and you had it, you know, companies like Simplifi and Madhive and people that reached a billion dollar valuation. And the interesting thing is that one, they're not the companies that raise the most money. And two, they're also not the companies that are hyper focused on kind of high profile national advertising. People we always see at trade events and and with great press, a lot of times they're focused on local or niche advertisers, maybe direct to consumer. They're not focused on the biggest brands. And I find that really interesting because when we started cross-screen media, we kind of went through the same thing. Like we didn't raise, you know, we only raised $2.3 million to start the company. And you know, the next probably smallest company raised $65 million. And we were trying to figure out why is this? And what we found out was that when you get into kind of the New York big ad business, you're dealing with a really small number of ad buyers and agencies. They have tremendous pricing power. So it's hard for you to actually build a profitable product. And they just haven't really created great businesses. They're very high profile, they've raised a ton of capital, but they aren't nearly as good a business as that we've seen exit. Because once private equity or somebody who's really looking to financials looks at it, the people they're giving the billion dollar exit to are these companies that are maybe focused on local or focused on a smaller advertiser where maybe the you know you can have higher margin products because instead of dealing with you know 200 brands total, you're dealing with 50,000 brands or more. And you've seen that also when you look at you know a company like Facebook, right? Like they have the highest margin ad product out there, but they're not making the most of their money from Procter and Gamble. They're making it from 10 million different advertisers across the the country. And I think that's we found a huge disconnect both when we talk to media companies in New York, but also ad tech and other companies, where they just don't really, you know, they kind of look at what we do as a backwater and we're like, well, this is actually a much better place

Why Local Advertising Is Underserved

Speaker 4:04

to be.

Tim Rowe, State of Streaming 4:05

It's really interesting. Traditionally, TV has depended on 80% of the revenue coming from those top hundred advertisers, bit dated, but that was a Moffat Nathanson stat that I thought was really compelling leading into this conversation because of what you just described. It's that long tail of local and who can crack the code on that. You mentioned one of your company's cross-screen media, your focus is all local. Why is local such a challenge?

Speaker 4:34

Well, we came out of the political space and kind of before that I'd co-founded an agency, and we kind of always assumed that there would be companies out there solving our problem. And so, you know, for a number of years, you know, we hesitated to build our own products, but we found was that most, again, kind of going back to that New York mindset, you you couldn't go below really the top 20 markets. And so, you know, they would look at Denver as being a small city and like, well, we need to be in Lake Charles, Louisiana, and Des Moines and Dayton, Ohio. And so we started to build out our own tech around what would this look like if you had to go into all 210 media markets? And and there are definitely again trade-offs you have to make, but our customers, they had to be there, right? Like that was where you know their battles were. And then we looked at it and said, well, everybody in local marketing has this problem, right? Because there is no product for you know, roughly 190 of the 210 media markets, they don't get anything, right? They don't get any measurement, they're the last people to get everything. And so we built our product to be, you know, for other ad agencies, but focused on the on

Defining Convergent TV

Speaker 5:34

the local space.

Tim Rowe, State of Streaming 5:35

And you wrote, I see it in your background there. I've got my copy here, Screen Wars in 2024. And you covered the topic of convergent TV. It's a term that I'm hearing more of today in 2026. But can you give us like the definition? What is convergent TV?

Speaker 5:53

Yeah, there's there's probably two big cuts of that. And the the the simplest is you know, kind of the convergence of linear TV and streaming. So you're really still talking about the big screen, and that's the most common use case today. But as with kind of the book and cross-screen media and and yeah, Screen Wars media behind me, obviously, with us showing a phone with rabbit ears, we think the big picture long term is this is really a battle for attention across all these devices. And we're not here today. Like there are very few media agencies that are doing all of those things, right? The same person is not looking at local ABC News, you know, Amazon Prime and TikTok, right? But that is long term where in the consumer's mind, they are the lines are blurring for what they consider to be a substitute good and where they're moving their attention. And long term, we see that actually convergent TV is going to include all these things.

Political Ads As A Testing Lab

Tim Rowe, State of Streaming 6:44

Political, we're we're coming into a midterm election season, it's starting to ramp up. That's a big piece of where your focus is. What are you seeing political-wise as streaming takes hold, convergent TV, video everywhere, thinking about all of these things from a political application? What do you say?

Speaker 7:04

Yeah, political is amazing because it it's a it's a test lab. And the fact that you can get people to try, you can almost live multiple lives in one election cycle where they will try something. If it works, try another thing, keep going. Whereas, you know, you look again, you look at that kind of more brand advertising. They're like, well, next year we'll do this, and next year we'll do this. And in political, we can actually float an idea and have it market in the same week. So for us, it's always been a blessing that we've been able to try so many different things there because everyone's, you know, the places that get the most attention are truly 50-50 races, and and anything can give an edge and be the reason for you know victory or defeat. And so it's it's just been an incredible Tesla for us.

Measuring Reach And Real Outcomes

Tim Rowe, State of Streaming 7:46

All right. So you're leading us in perfectly to the the measurement conversation. Political, it's very black and white. Did we win? Did we lose? There's there's not a lot of debate. It doesn't matter what the what the performance was on a dashboard, we're looking for an outcome. So when we think about measurement, there's so many layers to that. There's like the planning and strategy and audience understanding, psychographic, demographic, all of these sorts of things. And then there's the more bottom funnel, what the advertiser cares about, what hits my PL measurement of outcomes. How do you approach measurement maybe broadly as a concept, but then specifically when you're talking with an advertiser, how do you how do you approach that conversation?

Speaker 8:31

You know, I think at the high level, you you want to have, you know, your reachability is obviously a massive thing. And it's a you know, an old school metric, but it it plays an even more important role now that you're across so many different channels. You know, we believe if you took all streaming and all linear TV and you look say the 2024 election, about 13% of the battleground, the targeted voters, the you know, persuadable voters, never saw a single streaming or TV at because they just were not reachable on those things. And you think about all the billions of dollars. Well, if you're in a 50-50 race and you tell tell me that 13% of the people didn't see any of those ads, the obvious question is, well, how do we reach them? Right. And so people are starting political, once they are they get that first level of measurement, then they're like, well, now what do we do? And that's where you get into other things, right? And you see this kind of in the broader streaming ecosystem where you've got a performance marketing group and you've got kind of the brand marketing, those worlds are rapidly colliding, right? To where if you're running an ad, it's not always 100% one or the other, right? And also how you value that inventory, where if you're only doing direct response and you're only valuing it on a conversion happening, you're gonna shut off a lot of your media because it's not performing, right? And you're gonna move money to Facebook or another channel. But if you said, all right, well, what is the actual brand impact I'm getting from this? What is that worth to me? And then what is the actual like conversion impact of this? What am I getting? A lot more inventory looks like a good idea, but we're just really in the early phases of looking at that. And I think political is being one of the places you're gonna see that happen

Why YouTube Clearly Counts As TV

Speaker 10:04

first.

Tim Rowe, State of Streaming 10:04

Do you have a perspective on YouTube's role in all of this? There's debate, obviously, is YouTube TV? It's kind of like cable, YouTube TV, it's like a SaaS rapper. It's an advertiser. I don't think they much care. But do you do you have thoughts on on how YouTube fits into all this?

Speaker 10:22

Oh, yeah. I mean, every time I write about YouTube being TV, uh, people lose their minds. Writing about that and writing about how ad prices are gonna go up, or the two things like I know I can trigger we're gonna get to that too. Yeah, yeah, I know I can trigger our audience uh pretty well. But YouTube's clearly TV. I think that's uh an ad argument by the consumer has been settled for years. I think when you look at their ad business, you can say, all right, is there are they a TV ad business? And I'd say they're not yet there on that. But the the to the consumer, it totally is. But the way they package their product probably to the ad market, both at the local and national level, they've got tremendous room to grow. And I mean, that's probably why I'm so bullish on them as a company, is that I don't think they're doing a an amazing job at this yet. But they've got so much momentum and they're and they're capturing the attention. And that is actually the number one thing, is that if you if you don't have the consumer's attention, then the best ad offering in the world doesn't matter. If you have the attention and you haven't yet figured out the ad part, you know, the the sky's the limit for you. And so companies like YouTube and Netflix, you know, I'm extremely bullish on, even though I don't think either one has really figured out the ad side yet.

Tim Rowe, State of Streaming 11:30

Is there room, do you think, is there room for does a Fox and Roku combo deal, does that start to put on equal footing against like Amazon, a YouTube, Walmart plus Vibe plus Vizio? Like there's a lot of consolidation we're seeing. There's a lot of MA going on. Is it just YouTube and then everyone else, or is there a contender that can take YouTube on?

Speaker 11:54

Uh, I don't know that I'd say that you know, those guys, you know, like a Roku is growing, right? And so, you know, a Fox, you could say, all right, they've been pretty stagnant and they're they're spending a lot of money on sports rights to kind of maintain their position. But of the kind of traditional players, they probably had the best strategy, you know, up until today, but they're definitely growing, right? And they're eating, you know, Roku channel now is eating into probably cable at the most, right? Where you're seeing cable decline, then you see uh Tubi and Roku channel and these things gain, it's probably coming directly out of there. You know, YouTube to me, you know, in an over oversimplified view. If you if you went back into olden days when you had three broadcast stations and you just be simple, said, okay, NBC, ABC, and CBS each had 33% of the time. To me, that is like the zenith, like the ceiling. But I can completely see YouTube meeting or even slightly uh exceeding that. And that is a shock to people because but they're growing so rapidly, and at the same time, people are still kind of ignoring it because they're arguing, well, they're not TV, and I just think people's behaviors are changing so fast. I even look at my own my own, where a lot of times my my wife and I will watch a show maybe for 20 minutes before we go to sleep, and yeah, then I'll watch something else maybe after after she falls asleep. And traditionally, I would then flip it over to Netflix or HBO Max or whatever to watch something. And now a lot of the time I'm watching YouTube. Like I'm going on on my watch later and hitting the thing, and you know, it's not high production content, but I think that the people's behaviors are changing, and and kind of Madison Avenue is making the same argument they made 10 years ago. And I think that's that's over.

Tim Rowe, State of Streaming 13:33

It's interesting. I've noticed that a lot recently myself, where I'll go to an app that I pay for, can't find anything to watch, and then my default is just YouTube. I just go to YouTube because I know there's going to be something there within a few clicks or scrolls that I do want to watch. And I'm not gonna sit here frustrated that I'm paying for a thing and still can't find anything to watch. And definitely to my son, it ask a kid, hey, what's TV? It's YouTube, YouTube is TV. And I think even just playing that out a little bit, I can't imagine my son paying for an app when he is an adult living on his own. I I just can't imagine that. So, yeah, a lot, a lot there to be had in the YouTube piece.

The Math Behind Rising CPMs

Tim Rowe, State of Streaming 14:14

There's a there's a big gap between the bid and the ask. You pointed this out in in one of our recent conversations between CPMs today, a hot topic button conversation for for everyone, CPMs and projected increased ad spend with the tension share and demand on streaming. There are a number of things that go into that that kind of don't add up. Can you walk us through that?

Speaker 14:40

Yeah, you know, we we've got a really simple way of looking at this. If you say, okay, the market's gonna grow, say 10% in the next five years, and and you go into a room of people on the the buying and selling side kind of consensus, yeah, we agree that's gonna happen. And then the next thing is all right, well, ad inventory is gonna go down because as time shifts to streaming, the percent of streaming that's ad supported is lower than what's on linear. Like linear's 85, 90 percent plus time, you know, streaming's in the probably the you know 60s, 70s now. A larger share of that hour doesn't have any ads at all. But then the share that does have ads has a much lower ad load. And so you know linear TV's got 16 minutes per hour of ads. You know, you see four to twelve minutes at the most on the on streaming, and so a lower share of the time has ads, and then a fewer ads are running. And now that's you know, the gap is starting to close, but it's those two things together compound to mean there's a lot fewer ad opportunities. And so you you look out in the we build a model to go all the way out to 2035 on this, and so that even then we're probably gonna be about 11% fewer impressions than we have today. And so if the market has gone up 10% and the inventory's gone down 11, those two compound on each other to mean CPMs are gonna go up a lot faster than inflation, and that you know people think is crazy. But then you look at again, you go back to a platform like Facebook, where advertisers are probably paying a CPM on Facebook that's greater than what they're paying on streaming for that little ad running that they just flip by, and that's because they've brought in so many new advertisers into their auction environment that are valuing that inventory compared to what streaming has. And we're like, if you can replicate any part of that, you can get a much higher CPM. And we say, you know, the future is a hundred dollar CPMs, which drives people totally insane. But we already see that in political, right? Like at first, you know, you go into a battleground state and look on TV, they're paying a hundred dollar CPM on broadcast TV to carpet bomb where only maybe five percent of the people their actual target, right? And so you end up with an equivalent of a thousand dollar ECPM. Well, if you went to that advertiser and said, I can give you addressable advertising for $100 to these people, they would take it every every time. Right? So then you compare the two, you know, in the book, I have a car dealership in Atlanta and said, All right, well, if you took a, you know, you drew a polygon around a car dealership, said no one would drive more than 20 miles to get a car, which I think is still excessive, but to be conservative, and then you said, All right, you know, just doing that one thing made you know them already with a several hundred dollar ECPM. And then you said, okay, and now I'll put a flag of only people that we we think are in market to buy any type of vehicle, luxury car, truck, SUV, anything, the next 12 months. And then you got up to a thousand dollar ECPM. Again, you went to that group and said, I will sell you the same audience for $100, they would buy it every time. Just no one is currently doing that other than Facebook. They're stuck on what do we have to do to get the top 200 advertisers? Because everything, there's sales horses in New York, they're, you know, it's like you go to you go to the Super Bowl, you go to CES. It's it's a it's a great process, but it's missing a huge part of the market. And back to your earlier point, you get a company like Vibe, they exit for a billion dollars because they're they're hitting that other part of the market.

Movies, Mergers, And Apple’s Next Move

Tim Rowe, State of Streaming 18:00

One of the points that I've seen you make recently is about the relationship between the silver screen, movie theater, movie theater attendance, and that relationship to streaming. I recently went to see The Odyssey with my son. We both really loved it. Is there a relationship between the silver screen and streaming?

Speaker 18:20

Well, there's for certain an economic relationship because you know how you pay for the content is becoming you know a huge thing. And in that we saw it in COVID, where they you can't yet monetize a $200 million movie effectively. You know, you look at what you've got to add subs and all those things, like no one was really able to hit those numbers. You know, Netflix is still spending a lot of money on movies, but probably I don't think nearly as much as they were a few years ago. And then everyone else is trying to get it back into the theater. But if the theater doesn't get back to where it was, and we looked at it from inflation, it's if you adjusted for what's happened since 2020 on inflation, it's about 35% below where we were in 2019. That's a pretty big hit, right? And you're you're starting to see this where there aren't as many huge, big budget movies going out. There's not as much getting spent on marketing spend. So the the studios are starting to rationalize, but they haven't yet figured out how to do streaming in the theater together and recreate the level we had a couple years ago. And and you know, it's an area I'm you know I'm rooting for. I love going to the movies. I think that uh it's a challenging environment and you just haven't seen the you know the business get recreated where where we were.

Tim Rowe, State of Streaming 19:31

All right. I didn't tell you I was gonna ask this, but you just made me think of it. Does this paramount WBD deal, does that ever close, do you think?

Speaker 19:40

I assume so. Like I think that you know that you've got the people in Hollywood making noise that it's gonna cut the the number of buyers, which is a you know legitimate point. But you've got to look at the health of these businesses on their own and and who they're competing with, and I they just they can't compete with YouTube, Netflix, and Amazon without some scale, right? And you could say that that scale not properly managed isn't gonna do any better, but you have to assume that these businesses are gonna be run really well, they're gonna figure out how to make the most of the assets they have together and that they can compete with these other people. And I and even at Disney, like I don't know that they're set up correctly to compete, and they're in the best spot of anybody, you know, not named uh YouTube or Netflix, but the economics for these businesses are much more challenging than than people think, and there's a huge disconnect. Like if you talk to somebody that is in ad sales or in content procurement, they think everything's fine. And but you talk to the people that talk to Wall Street and they're freaked out, right? You know, and so it's just a total from the same company, but two people, and and we try to kind of bridge the gap there on our writing.

Tim Rowe, State of Streaming 20:48

John Turn is taking over as Apple CEO later this fall. Do you think Apple TV makes any interesting moves?

Speaker 20:55

Yeah, they're interesting. I mean, they they have some fantastic content. It's on its own, obviously not a great business. I don't know if they care. Like it's uh it's hard to tell.

Tim Rowe, State of Streaming 21:04

Do they care or not?

Speaker 21:06

Yeah, it's super hard to tell. I mean, they're spending a lot of money still, and it's high quality, which is uh kind of the Apple West. I use them as a proxy a lot of times for other things. You know, I think I did one where I showed that you know, more people watch gunsmoke on fast than watch Apple TV's everything, like you know, the catalog. Wow, and it's good uh you know, gun smoke is a fraction of what they spend on content. But again, I don't they could see that and they they're like, well, we don't care. So I don't know.

Tim Rowe, State of Streaming 21:31

We don't care, right? Thinking about the Apple core business, it's that vertically connected kind of tech consumer lifestyle, right? The content could just be it's just a nice value add for being an Apple customer, yeah, having it integrated to the rest of your life.

Speaker 21:47

And like, I don't think they can go, you know, a few years ago, we would have said they're gonna bid on the MBA, they're gonna bid on, you know, maybe not the NFL, but these other the next tier down. But with what's happened with MLS, like I don't know that you know they could have all the money in the world. I don't know that those leagues would sell them their main rights because it is really the audience has been so small.

Tim Rowe, State of Streaming 22:05

That's a great point. Would the league entertain that opportunity? Something to pay attention

Where To Follow Michael’s Work

Tim Rowe, State of Streaming 22:10

to, Michael. If folks want to learn more about your work, connect with you. You've got an incredible Substack. Tell us about the Substack.

Speaker 22:17

Yeah, statethescreens.com. We've written every week for 480 weeks straight now. So incredible. Uh almost 10 years straight. And uh yeah, I just you know, love the feedback. Awesome.

Tim Rowe, State of Streaming 22:28

Well, we look forward to having a future conversation with you about many of the things we've talked about here today. We'll look for some updates down the road, and certainly there's going to be new stuff to talk about.

Speaker 22:38

Perfect.

Tim Rowe, State of Streaming 22:39

Awesome, Michael. Thank you so much. We'll link to all of that nearby. So if you are listening and you found this conversation to be helpful, please share it with a colleague or a client. Start a conversation yourself today. Check out Michael's content, get the book, get the book Screen Wars, get up to speed. It's full. I Michael, what blew me away about the book is how well cited and documented everything is. Like it's small, it's bite sized, you could throw this in your back pocket, but it is loaded. All killer, no filler. Great work.

Speaker 23:07

Thank you.

Tim Rowe, State of Streaming 23:08

You're welcome. We'll see y'all next time.