Atmosphere, valued at $1B, plans to corner the out-of-home streaming market

With a round of fresh funding and $1 billion valuation, Atmosphere is plotting its course to become a must-buy for advertisers as it works to lift the mood in bars, restaurants and other third-spaces with its out-of-home streaming service featuring a collection of audio-optional FAST channels.

Since 2019 the company has marked growth, more than doubling its customers in 2022 with a current presence in just under 50,000 locations and a reach of over 60 million unique monthly viewers, alongside a pile of capital. It’s latest was $65 million in a Series D round led by Sageview Capital, Valor Equity Partners, and S3 ventures, based on Atmosphere’s $1 billion valuation. The company has over 60 free ad-supported streaming TV (FAST) channels focused on short-form content that doesn’t need audio to enjoy, from the likes of the PGA Tour, Trusted Media Brands and others.

Blake Sabatinelli, who recently stepped into the chief executive role after serving as Atmosphere’s COO, told Fierce Video the company is adding around 5,000 new locations a month, and each month tallies “millions and millions” of new viewers.

The team is feeling excited about momentum and sees Atmosphere as a distinct opportunity for advertisers who are looking for a holistic media plan but might not have CTV in third spaces on the radar just yet.

“Our biggest advantage is our biggest challenge, we’re…a category of one at the moment,” said Atmosphere Chief Revenue Officer Ryan Spicer, in an interview with Fierce Video, noting the streaming service brings addressability and targeting capabilities to new places for marketers.

In the out-of-home market there is competition from the likes DirecTV and Comcast for Business, which already deliver traditional TV services to bars, restaurants and other commercial locations. DirecTV for Business just reached a deal to serve up Apple’s MLS Season Pass in over 300,000 locations across the country. In places like sports bars where there are multiple screens, Sabatinelli said Atmosphere is a great complement to those competitors, where its service lives alongside traditional TV providers – whereas in single TV locations such as doctor offices or auto stores, it can serve as a full replacement for programming.

“It’s free, it saves the location money, and it’s made for the eye not for the ear,” he told Fierce. “Ninety-nine percent of the time those screens are on mute and that’s how we program our content.”

In line with its namesake, the goal for Atmosphere is to lift the mood and make out-of-home social settings and other places, such as gyms or dentists, enjoyable with easy-to-consume content.

“We're really trying to brighten the mood, brighten the space, bring something that makes life more communal,” Sabatinelli said.

Contextual, addressable advertising

On the advertising front its model also presents chances for advertisers to reach consumers in the places they frequent when not at home, and close to their point of transaction, with the execs pointing to advantages of targeting in third location environments.

Sabatinelli noted that compared to traditional pay TV with the same ad load and programming that exists on the TV in the living room, Atmosphere allows advertisers to target by location, geography,  time of day or venue type, “and really bring that contextual advertising to life in an addressable capacity, in a way that traditional cable can’t.”

And some advertisers are endemic to this type of streaming service, according to Spicer, who joined Atmosphere last October, such as food and beverage, liquor, credit card service or rideshare apps, to name a few. For example, he described a scenario where an advertiser follows a consumer through the journey at a bar: A tequila ad pops up as a patron decides what drink to order; a credit card offer appears reminding users of perks as they reach for their wallet to pay; an Uber or Lyft ad comes on, influencing a consumer as they pick which rideshare app to call as they head home. Need to pick something up on the way home? A retailer like Target or CVS could also put a campaign together that targets within two miles of a location. Outside of bars and restaurants, there could be ads for purified water on a TV at a gym; or advertising on its Paws channel (one of Atmosphere’s highest-rated channels) at vet offices, he noted.

Aside from purchasing behavior, making the OOH TV experience better is a key part of the business aim. Spicer pointed to the common experience of waiting longer than expected for a doctor’s visit, where Atmosphere TV featuring audio-optional clips of cute pets could make the waiting room time a little more enjoyable.  

And those advertising opportunities are just scratching the surface, according to Spicer, who sees the possibilities as much broader because of Atmosphere’s scale and reach.

Spicer, a former ad sales exec at Turner and WarnerMedia Digital (now part of Warner Bros. Discovery), said one thing that gets him excited is that the company is expanding the definition of connected TV. While he noted that CTV is IP-based delivery of content and digital enablement of ads on TV screens, it has by default been limited to the living room.

“We’ve taken all of that optionality, the dynamic nature of connected TV, what was previously broad-based linear television execution that started in the living room, and we’ve expanded to outside the living room,” Spicer said.

Atmosphere’s model is completely ad-based, meaning it doesn’t charge establishments and generates all of its revenue from ad sales. Its location partners get self-serve advertising solutions and a video creation toolkit.  According to Spicer, conversations with advertisers so far have been good but that doesn’t always mean easy as they require a level of education as to why Atmosphere should be factored into media buys – something that he says is usually straightforward once he explains.

“We've actually taken screens now that were dormant for marketers, and we've put those screens and the opportunity to reach these tens and tens of millions of people in a new dynamic way, into the hands of marketers,” Spicer said. “I get excited when I talk to brand marketers, and that light bulb goes off for them.”

Harking back to his time at Turner and WarnerMedia, he noted there was a period when advertisers weren’t sold on the value of connected TV, even as consumer usage ticked up. He sees Atmosphere in a similar situation now.

“We have tens and tens and tens of millions of viewers who watch billions of hours of Atmosphere TV,” Spicer said. “So I see my role in a very simplistic way, to see advertiser adoption catch up to consumer and viewer habits with Atmosphere.”

Going back to the point of being a market of one, he noted that Atmosphere doesn’t fit perfectly into a bucket of what marketers traditionally draw on currently, and is unique in its offering.

“Marketers can choose whether or not they want advertising dollars with us, but they can't say to us, ‘Oh, we do that already with another partner’,” Spicer said. “There's no partner that adds the distinct capabilities that we can, to utilize connected television, to utilize TV screens at scale with diverse events, news, scale of DMA’s that are fully national.”

With so many people coming in and out of third spaces, there’s also the question of accurate measurement. Atmosphere works with a company called the People Platform, recently acquired by Stagwell, to do audience and measurement research to generate coview multipliers and average minute impressions. According to Sabatinelli, it looks and feels like a traditional Nielsen linear book. Atmosphere also does in-depth surveys, usually between 35-50 questions for consumers that have visited locations, asking about who they were with, where they sat, how many times they’ve seen content, and so on, and uses that with foot traffic data to get total reach and ad impression number on an hour-by-hour basis, with data ported into platforms like Nielsen Media and others.

“It transacts just like a traditional video impression” Sabatinelli said. Adding that’s important “because we want marketers to understand that…we’re just making television for the 50% of time that people are somewhere outside of their home, and we want to make this as easy and seamless as possible for them.”  

Content to see, not hear

In streaming, content is usually king – that holds true for Atmosphere, but with a notably distinct focus from major at-home streaming services in that it’s zeroed in on audio-optional and sharable moments.

And there appears to be no shortage of those looking to get content on Atmosphere’s platform, with Sabatinelli noting that large audiences bring lots of content companies out of the woodwork for carriage, but not everything is the right fit.

“More often than not, we say no,” he said of content partnerships.

In most cases, he said, reruns of say Judge Judy, Jerry Springer or whatever else may be the newest FAST channel doesn’t make a lot of sense for Atmosphere. “In that instance, we’re still displaying the content with captions. And if you’re sitting 20 feet from [it], in a bar with your friends, it's a terrible viewing experience."

For Atmosphere, it’s all about finding content that’s additive to a location.

“I think that’s been a key catalyst for us and our growth,” Sabatinelli said. “Having something that gets people to put their phones down, to look up and share a communal experience truly does allow our sales team who gets new installs and locations, to call with something different and differentiated, and something that people can really lean into.”

Sports are part of the picture, but the company wants to get back to the basics of sports news programming  – which outside of live events means highlights and clips rather than talking heads and commentary requiring audio for a good experience. Sabatinelli cited the PGA Tour, which was first for the league in launching a FAST channel, as a great example of content also plays well against live programming.

That said, big sports rights aren’t part of the plan as of now for Atmosphere as they’re not looking to outbid the likes of Apple or Amazon, he noted.

“I do think there’s opportunities to find…more niche programming, while also really leaning into the sports news side where we know we can win,” he added.

And with 2023 a year focused on scaling further, Atmosphere still has room to grow. Sabatinelli estimated Atmosphere’s addressable market in the U.S. at around 2.4 million locations, saying it has “plans to attack a significant amount of that share.”  Add in Western Europe and there are an additional five million locations. About 90% of its total install base is domestic, but he said Atmosphere is also growing footprints right now in Canada, UK, Ireland, Australia and Norway.

“I think we’re going to get a decent chunk of this knocked out here in the next couple of years,” he said.

That includes funneling funding into continued hiring efforts for the sales team, which expanded starting last year, scaling up sales operations, doubling down on marketing efforts where necessary, and where it makes sense, expanding content.

“2023 is about us rapidly running and scaling at a speed I think is going to really surprise people,” Sabatinelli noted, including a focus this year on achieving growth targets on the platform side as well as Spicer’s revenue objectives. “By the end of the year it’s my hope that we’re reaching well into the 100 million adult viewers on a monthly basis…allowing us to become more of a ‘must-buy’ and less of a point of consideration” for advertisers.