Digital video companies are turning to 24-hour linear feeds to grab more ad dollars. A top Whistle exec breaks down the strategy ahead of its new channel launch.

• More digital-native studios are launching linear streaming channels to get in on the growing share of advertising dollars that are shifting to over-the-top streaming (OTT) platforms.
• Digital-entertainment company Whistle is the latest to go over-the-top with a 24-hour streaming channel, WhistleTV, that will land on at least two ad-supported OTT platforms later this year, the company told Business Insider.
• "We've been seeing the audience shift to OTT increasing," a Whistle exec said. "Quite frankly, the ad dollars are also moving to the OTT platforms ... We want to make sure that we capture the eyeballs as well as the ad dollars."
• By 2020, ad spending on OTT platforms in the US is forecasted to hit $5 billion, 85% more than the spending levels two years earlier, estimates from ad-buying group Magna Global show.
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More digital-native studios are launching linear streaming channels to get in on the growing share of advertising dollars that are shifting to over-the-top streaming (OTT) platforms.

Digital-entertainment company Whistle is the latest to go over-the-top with a 24-hour streaming channel, WhistleTV, that will land on at least two ad-supported OTT platforms later this year, the company told Business Insider.

Whistle, which has been distributing, since 2014, sports and lifestyle video across digital platforms from YouTube to Snapchat, noticed that its most popular shows, like "No Days Off," were starting to be watched more regularly on TV screens. The ad rates on OTT players were also rising faster than on platforms like YouTube.

As Whistle worked to diversify its revenue and acquire digital studios New Form and Vertical Networks in its push to become profitable, it wanted to make a play for those OTT ad dollars with WhistleTV.

Read more: Whistle is buying media mogul Elisabeth Murdoch's mobile-content studio, Vertical Networks

"We've been seeing the audience shift to OTT increasing," Izzet Asayas, executive vice president of distribution and sales strategy at Whistle, said. "Quite frankly, the ad dollars are also moving to the OTT platforms ... We want to make sure that we capture the eyeballs as well as the ad dollars."

By 2020, ad spending on OTT platforms in the US is forecasted to hit $5 billion, 85% more than the spending levels two years earlier, estimates from ad-buying group Magna Global show.

Other digital studios have also started programming free-to-air channels on streaming-TV services like The Roku Channel, Pluto TV, and Xumo. Subscription-sports service FuboTV launched a free network on The Roku Channel, Xumo, and other platforms last month. Otter Media's Gunpowder and Sky debuted a science-fiction channel, DustX, on a number of platforms earlier this year. And Revry, an LGBTQ+-focused content company, programs a channel for Pluto TV.

Millennial-news network Cheddar, the original "post-cable" network, is perhaps the most successful example. It started streaming a live linear channel on Sling TV in 2016, and later rented a broadcast spectrum to expand its reach. The company announced its sale to Altice USA for $200 million earlier this year. The company said it was on track to be profitable in 2019.

Read more: Cable TV company Altice USA is buying the streaming-news network Cheddar for $200 million

These free linear networks typically forgo the carriage fees paid in the traditional TV ecosystem in favor of advertising revenue. There are two main revenue models, Asayas said:

• Revenue share
• Inventory share

WhistleTV will focus on the latter, since it already has its own ad sales team. If eight minutes of commercials run in a 22-minute episode on WhistleTV, Whistle might sell six minutes of that inventory and the rest could go to the OTT platform, as an example. Asayas did not reveal the actual inventory split in the upcoming distribution deals.

Linear channels are more expensive to run, but can potentially capture more ad dollars

OTT players like Pluto TV, which has about 18 million monthly active users, have smaller potential audiences than platforms like YouTube, which reaches more than 2 billion active users per month.

And streaming networks are more expensive to run than channels on YouTube or Snapchat.

• Asayas said Whistle had to hire people who knew how to develop content and program for different times of the day, which it didn't need for on demand. It brought on former Hulu and Warner Bros. exec Griffin Gmelich to oversee the linear OTT push.
• Whistle is investing in video players, content-management systems, and other technology to deliver the video feeds.
• It also needed more programming to fill the hours in the day. WhistleTV will be leaning on its library of existing originals and influencer-led content, which will be recut and refreshed to work for linear, as well as programming from some niche sports leagues, movies, and documentaries.

"Once we move into this space, we want to make sure that we are not leaving anything on the table from programming to monetization to tech," Asayas said of the higher investment.

But there's more ad inventory available in a 24-hour, seven-day-per-week linear channel than in the short-form, on-demand videos on YouTube.

The CPMs, a standard ad-buying metric that measures revenue per thousand views, can also be much higher, Asayas said.

A major broadcast network that sells ads direct on OTT platforms can reach CPMs of $35 or more. Programmatic CPMs can be in the double-digits. CPMs on YouTube, which vary wildly based on geography and other factors, are often in the single digits though they can go well into the double digits.

Asayas said Whistle's research suggests the margins on OTT streaming channels can be higher than on social-media channels, in spite the higher costs.

"Seeing both from our first-party data as well as third-party data that these OTT platforms having a considerable amount of audience, and the audience that we're targeting, basically made it a no-brainer for us to move into this space," Asayas said.