Commentary
Streaming, CTV CPMs Under Pressure As New Ad Options Expand
- by Wayne Friedman , Staff Writer, April 25, 2024
As competitors ramp up their
advertising video-on-demand (AVOD) options for their streaming/digital platforms, growing connected TV inventory is expected to “outpace demand near term,” says Bernstein Research.
This will result in continued downward pricing “adding deflationary pressure on eCPM [effective cost per thousand pricing] in the foreseeable future,” writes Laurent Yoon, media analyst for Bernstein Research.
According to estimates from eMarketer data and Bernstein analysis, current CPMs (cost per thousand viewer prices) show that Netflix is at a $48 CPM, with Disney+ at $46, Peacock at $40 and Hulu coming in at $25.
Near term, Bernstein projects that the new low-cost consumer advertising options of streaming platforms will face challenges -- including those of Netflix and Disney+.
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The long-term picture looks better, however -- especially for Netflix, says Yoon, because it has the highest subscriber engagement (viewing) which means more ad revenue for its year-and-a-half-old advertising option.
Amazon Prime Video's decision earlier this year to start up a Prime Video advertising-option caused some alarm among media executives about a massive decline in CPMs.
Initial reports cited Amazon's starting CPM price in the mid- to-low $30 range. Bernstein now believes that it will be closer to $20.
Amazon, along with its potential 157 million Prime monthly subscribers (where they have access to the Prime Video streamer) is expected to continue to flood the market with new streaming advertising and put significant pressure on CPMs.
Due to its default option for Prime Video where subscribers automatically switch to AVOD tier is expected to result in 115 million monthly users -- around 75% of overall Prime subscribers.
One positive side, according to Bernstein, “Amazon’s AVOD minutes will be constrained by lower engagement per user, with the average user consuming 19 minutes/day compared to Netflix’s 50 minutes.”
Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
Wayne, the advent of FASTs on CTV, which have little choice but to specialize in lower cost "non-premium" fare, has been driving CPMs down at a fairly heady pace. While CPMs for "premium" content sellers like Netflix---despite its very small coverage base---and some others--- remain fairly high---they, too, have had to lower their CPMs to compete with linear TV and with eachother.
When all of the options from the top 10 or 15 sellers who account for most of the national GRPs available via streaming are combined we expect to see a fairly substantial CPM reduction in the impending upfront compared to last year. This will diminish the value of anticipated higher CTV ad spending---but that's what we have expected all along. There are too many sellers and not enough premium content GRPs to justify charging so much more than linear TV per viewer. This is especially so as the average CTV viewer does not pay more attention to CTV commercials than his/her linear TV counterpart and CTV viewers, while somewhat younger are not so heavily concentrated in the light viewing upper income groups to justify higher CPMs for some advertisers.
The solution, of course, will be for CTV sellers to increase their commercial clutter----to compoensate for CPM reductions. But that will be a major part of next year's story.