Though much is touted about the growth of audiences on digital media and migration away from television, many of these online-first networks are striving to strike TV deals. Huh?
On Wednesday, Vox Media announced its first TV deal. A+E Networks' FYI has ordered a 30-minute series with a working title of "Prefabulous." It will be produced by Vox Entertainment and its digital real estate and home website Vox's Curbed.
"As our company grows and as the TV landscape changes and as the business model shifts, we have a real opportunity to have a seat at the table at the future of television — which is on-demand, high quality programming," said Chad Mumm, vice president of Vox Entertainment.
On the surface, it's clear why digital media companies want the lucrative TV deal. For now, TV advertising budgets are larger than those for digital media. EMarketer said in 2015 that 36.8 percent of advertising budgets are allocated for TV, while 35.8 percent go to digital media.
But as audiences continue to cut the cord and digital viewership grows, digital media companies are betting they'll be able to cash in, especially using the longer form content they have created for TV on digital platforms. So for now, it's about finding opportunities in both the TV and digital spaces.
EMarketer estimates that digital media spending will exceed TV as early as next year.
Massive shifts in TV were already taking place. On Wednesday, Magna Global, the media buying division of IPG Mediabrands, announced it was moving at least $250 million of TV ad budgets to Google Preferred. That platform allows advertisers to advertise on the top 1 or 5 percent of YouTube videos.
Christina Norman, CEO of media agency Media Storm and a former MTV and OWN executive, said there are benefits to TV and digital ads. TV may still have a larger live audience, but thanks to the growth in on-demand viewing, it no longer matters as much whether a show is on prime time or at 2 a.m.
What's more important is that brands can use data and trends to figure out the best time and where to buy content, Norman said. Digital media companies are more open to that flexibility since a lot of television networks require a monetary commitment upfront before programming for the year is set. However, even TV networks are beginning to be more flexible.
"It's going to continue to be about that mix, and it's going to continue to be fluid," Norman said.
However, Vox's Mumm said bigger TV ad budgets wasn't one of the main factors behind its deal. Rather, he believes the real potential for revenue lies in the fact that more over-the-top networks are seeking traditional TV content.
While short-form clips are easier to make, Mumm said longer episodes are what people want to watch. Getting Vox in the position where they can have that library of episodic content can provide a new revenue stream for the company in terms of content licensing deals, he said.
"There's no demand for that short-form content, but (OTT providers) can't afford to buy shows like 'Top Chef,'" Mumm said. "For us, let's produce that content for that demand. It's not for YouTube. It's not for Snapchat. It's the big leagues. We'll also focus a lot on programming for digital, but we just think it's two different tracks."
Brian Selander, executive vice president at the Whistle Sports Network, believes digital media is the future thanks to the growth of the audience and time spent on the platforms.
"Linear (traditional TV) does make sense for a buy, but it just makes more sense to supplement that on digital," Selander said. "The digital/social audience is growing substantially, and the number of time spent on those platforms is growing as that audience shifts as well."
Still, Whistle — whose investors include Derek Jeter, Peyton Manning, BSkyB, Liberty Global, NBC Sports Ventures and Tenga — may have started as a digital sports network, but has since branched into TV. Its ultimate Frisbee champion Brodie Smith was a competitor on "The Amazing Race." In April, it debuted the "The Dude Perfect Show" on CMT.
The first episode featured L.A. Clippers' Chris Paul and Green Bay Packers' Aaron Rodgers making nearly impossible shots on behalf of their charities. The event was sponsored by State Farm Insurance. It ranked number two across cable in its time slot for males ages 12 to 17 with a 1.29 rating. Overall, it was network's highest-rated original series premiere among teens.
However, the content is far from new. The clip was originally posted on YouTube in December, and has been viewed more than 11.1 million times on the platform.
Selander points out that having its digital talent on the small screen is more than just about the immediate TV ad revenue, but about showing crossover appeal. In the end, it helps Whistle's business. Brands find their talent more attractive for deals because they can reach a larger mainstream audience.
"Originally they called Dude Perfect 'YouTubers,'" he said. "Then they were able to dominate Facebook, Instagram and Vine. It wasn't just the format of YouTube. It was their ability to relate and ability to connect. Them being able to succeed on linear TV is really about them as talent, not just what screen you enjoy them on."
Disclosure: NBC Universal, the parent company of CNBC, is an investor in Vox Media. It also owns NBC Sports Ventures, an investor in Whistle Sports.