Commentary
Streaming Wars Demand A Game Plan: Ad-Supported Or No Ads
- by Wayne Friedman , Staff Writer, December 4, 2019
Who’s winning so far? Consumers and marketers.
An IAB study in August showed over three-quarters (76%) of those who regularly stream video say they watched ad-supported OTT (ad-supported video on demand). Nearly half (49%) of those streamers report they watched ad-supported OTT most of the time.
Premium video streaming has gained big momentum, particular with D2C advertisers that look to expand efforts beyond their narrow-focused digital platforms to include traditional linear TV, as well as related premium OTT platforms.
Advertising on OTT is expected to grow 37% this year to almost $7 billion, according to a recent eMarketer estimate.
But there is less clarity when it comes to standard measurements of OTT activity and business outcomes.
A range of ad-supported digital VOD platforms include vertical programming platforms like Hulu and CBS All Access; set-top box/software platforms (Roku or Amazon Fire TV); as well as virtual streaming linear TV services (Sling TV, AT&T Now, fuboTV, Tubi TV). At the same time, there are full subscription, no advertising services: Netflix, Disney+, Apple TV+ and the upcoming HBO Max.
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Of course, some are playing in both advertising and non-advertising areas: Hulu, as well as HBO Max and NBCU’s Peacock.
Consumers may wonder what combination of digital services they might want -- not just to replace traditional TV services, but perhaps as transitional services. Many have both traditional TV and digital TV platforms.
The Video Advertising Bureau says 70% have both -- with 15% doing streaming-only and 15% with a streaming and digital TV antenna combination.
Other recent surveys note there is a wide disparity among demographics. For example, the VAB says 65% of Gen Z/millennials have four or more paid OTT subscriptions, with just 13% of seniors/baby boomers having four or more.
Do you need a game plan? Maybe throw in a detailed algorithm of your own choice.
Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
A very interestinjg subject, Wayne, and one with no easy short term answers. Long term, however, it seems clear that as the streaming space is invaded by "linear TV" programmers like Disney, Comcast, CBS/Viacom, Discovery, etc. these will be bringing with them many kinds of content---already produced----which Netflix, Amazon, Apple, etc do not seem interested in----talk shows, reality shows, news, game shows, etc, as well as content that is not available to them like premium sports and big event coverage and specials---all of which are traditionally ad-supported.
I believe that the lure of ad dollars---the low hanging fruit---will be so great that many of the new streaming entities---as well as incumbent leader, Netflix---will offer ad-supported platforms to those who want such content----either free or, more likely, at reduced rates, sometimes using an initial free offer as a sales hook to capture more fish. These will be trail and error operations with many failures as well as successes---but that may be a good thing as, eventually, business models that work well for program producers, ad sellers and viewers will develop. It is also likely that as "pay TV" shrinks down to the 50% level in penetration while over-the-air only adds 14-15% in coverage, but mostly for older skewed broadcast TV content, that more and more ad dollars will shift to Streaming/OTT. These will, undoubtedly, command far higher CPMs than advertisers are used to---so get ready advertisers, TV's bargain basement CPM days may soon be over---at least for 40-50% of your total TV budget.
The lazy, high reach, low cpm tv buy will go away replaced by fragmented, targeted, higher CPMs, operated through technology.
As consumers become more and more accustomed to watching contnet withous ads via the likes of Netflix and Disney + etc, it will be much more difficult to introduce advertising on these type of platforms long term (maybe sponsorships?). We already are seeing a huge migration away from linear tv watching, and doesn't it feel like the Commercial Pods seem like an eternity now that you can stream your own Ad Free content when you occassionaly go back to Linear?
Michael, the "huge migration" away from "linear TV "in terms of viewing time now amounts to about 4% annually, though it will probably increase as more and more "linear TV" content shifts to streaming venues via Disney+, Comcast, CBS/Viacom etc. Another thing to consder is that a lot of people---maybe not you or I---don't object so much to commercials per se but to over cluttered ad breaks such as we see on the cable news channels and some other places. Hopefully, those who launch ad-supported streaming platforms will have the good sense to present fewer ads per break----in which case subscribers who want to see their content--- local news, talk shows, reality shows, cooking shows, old movies, etc. etc. as well as whatever original content they offer---while paying less in exchange for ad exposure will have no problem at all. And advertisers will gladly pony up much higher sums per viewer for better targeted buys---at the outset. What happens next, is anyone's guess.
The huge migration for the affluent suset with the money to buy the autos and other costly items is much higher than that Ed. I get my news online (which most local news broadcasts use and regurgiutate), I get my weather/sports on my phone, and why on earth would any sane person want to sit through a formulaic drama or comedy on Network or cable tv when they are subject to 1/3 of the time wasted with commercial breaks? Especially when they can watch almost double the content in the same time on a Netflix? Time is our most precious commodity so who wants to waste it sitting in front of ads on linear tv? Go do something else and watch what you want when you want without interruptions.
Michael, yes, if you take particular segments of the population there is a greater or lesser propensity to switch to streaming as opposed to "linear TV". And affluents and those under the age of forty are, so far, the biggest defectors--though they still spend a considerable amount of time with traditional TV.
As for commercials driving people away that's one of the reasons often cited but the primary reason for "cord cutting" has been assumed cost savings---which may not turn out the way that many consumers hope for. Regarding the amount of ad clutter on TV, its roughly 25% of the content and less in primetime, though certain channels are guilty of excessive clutter. Still, there is no evidence that this significantly impedes their audience garnering capabilities---meaning that lots of people get used to it and/or pay no attention or leave the room---only to return when the program content resumes.
At TV's current pricing an average advertiser now pays between one and two cents per viewer reported by Nielsen. The real figure---when you delete the empty rooms and those paying no attention is roughly double that---three to four cents per ad viewer---which is still a bargain in my book, providing the ad is crafted smartly and its message is on target. Which is my basic point--or, rather, a prediction. Will TV still be a cost effective platform---no matter how the audience is attained--- if the cost per viewer doubles or triples? I don't know the answer---it may vary from advertiser to advertiser---and what's the alternative---digital video? Wont its rates also rise?