Do Streaming Video Services Threaten The Video Ad Market?

It has been recently reported that by 2020, streaming video services (e.g. Netflix, Amazon Prime) will surpass traditional pay TV as the primary way consumers get their video content. This prediction was based on a study from Irdeto, and doesn’t come as any great surprise for media agency insiders.

Binge viewing was a primary driver for streaming service preference, as 39% of US consumers said that watching multiple episodes of a series gives streaming services an advantage over traditional pay TV.

According to Irdeto’s study, only 18% of US consumers expect to watch “most” of their video content via traditional pay TV in 2020. However, that same number for streaming services was 27%. Preference for streaming was even more pronounced among younger consumers (18-34). 40% of them said they expect most of their video consumption to occur through streaming services.

The change we are experiencing in the video landscape is undeniable. The decline in traditional TV ratings and the explosion of streaming options have caused marketers and media agencies to re-think their go-to-market video approach. Agencies are already creating holistic video plans, incorporating online video as an integral part of their client’s video mix.

As video viewership continues to migrate to digital channels, a further increase in online video as a percentage of total video investment needs to be considered. However, the continued move toward video viewership through OTT services stands to threaten the overall amount of video ad inventory in the marketplace.

These services are typically ad-free and allow consumers to view content virtually uninterrupted. If video viewership through OTT services continues to rise, it stands to reason that the amount of ad-supported video will decline. Does this mean the ultimate demise of ad-supported video? Hardly.

Today, most consumers enjoy a combination of ad-free streaming services and ad-supported video channels, as this provides them with maximum content choice. Ad-supported video also allows producers to monetize their content in multiple ways and provides a lucrative revenue stream for content distributors.

As a result, ad-supported video will almost certainly play a critical and ongoing role in the video ecosystem.

Agencies need to understand and embrace the evolution we are currently experiencing in the video landscape. We must continue to closely monitor video consumption trends and recommend cross-screen video plans that capitalize on consumer video behavior. If ad-free internet services end up significantly impacting our ability to deliver our video message at effective scale, we should look to other media channels to ensure effective overall media weight.

However, if history is any indication, I don’t think there will be a shortage of video ad-inventory in the future. Video advertising opportunities have only increased in recent years. Given the financial opportunity that exists in video advertising, and the continuing upward trend for online video, we should expect that to continue for years to come.

1 comment about "Do Streaming Video Services Threaten The Video Ad Market? ".
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  1. Leonard Zachary from T___n__, January 19, 2015 at 11:51 a.m.

    Huge opportunity for mobile video ads for both live broadcast stream and video on demand stream. Both SVOD and ad supported video will be part of the content landscape. Those that bring innovation to all of these elements will be successful.

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