The ad-supported versus subscription-supported question is becoming increasingly irrelevant, according to executives from major entertainment companies, AVODs, SVODs and tech partners alike.
“It’s not one or the other — it’s a continuum,” said Mark DeBevoise, chief digital officer, ViacomCBS and CEO and president of ViacomCBS Digital, during this week’s virtual Fall TV 2020 conference. “When you think about the history of TV, it’s always been a continuum,” he added, noting that cable and premium cable had been coexisting with broadcast for decades prior to the advent of OTT.
ViacomCBS has made that philosophy clear in recent years through its addition of two different streaming services with different monetization models to its broadcast, premium cable and other holdings.
Pluto TV, the free, ad-supported service it acquired in 2019, will remain separate, in part because most of its programming portfolio is sourced from outside ViacomCBS, he said.
CBS All Access — being expanded in preparation for its Q1 2021 rebranding as Paramount+ — already has a hybrid model, with a basic subscription with limited ads priced at $5.99 and an ad-free (except for live-streamed stations) tier at $9.99.
Pluto TV is thriving on its AVOD model, while the success of any subscription-based or partially subscription-based service boils down to whether consumers perceive the price to reflect the value proposition, DeBevoise said.
ViacomCBS does “a lot of testing at both ends of the continuum, from Showtime to Pluto TV and everything in between,” he said.
The company doesn’t view the direct-to-consumer model as threatening to traditional models, he emphasized, noting that 70% of CBS All Access subscribers also subscribe to a premium cable service.
“We make sure we’re not prioritizing one business model over another," DeBevoise said. "We focus on giving the consumer as many choices as possible, as long as we can make money on it.” The company’s reorganization to eliminate content siloes and make it possible to readily distribute all of its intellectual property in whatever channels make sense is critical to succeeding in a multichannel environment, he stressed.
Pluto TV CEO and co-founder Tom Ryan, in a separate session, pointed out that more new streamers from significant players are being launched as AVODs, or SVODs with some advertising support.
“I feel good about our positioning — particularly having the backing of a big media company behind us as the AVOD competition becomes more intense," he added.
Farhad Massoudi, CEO and founder of AVOD Tubi, now owned by Fox, argued that the free-to-consumer, ad-supported model may now be the best-positioned. It’s become clear that consumers will not — as some were predicting — shell out for seven or eight SVODs, particularly now that so many are struggling financially, he said.
“A lot of SVODs have died, and more will die,” Massoudi predicted, describing the deep-pocketed but struggling Quibi as “the canary in the coal mine.”
However, he allowed that subsidizing paid subscription services with advertising is a model that will work “for some.” The big challenge for that model is complications around content rights, he added.
“The bottom line is that consumers ‘prefer’ both” the AVOD and SVOD models, for different reasons, summed up Geoff Wolinetz, senior vice president, client relationships for FreeWheel, in another session.
“That’s why HBO Max and Peacock are tiered,” he said. “It’s a wonderful strategy” that reflects that consumers want different experiences at different times, as well as cost and other factors.
“If the content is right, they’ll pay for that value,” he said. With AVODs, “people generally understand the value proposition of advertising, and as long as we don’t take advantage of them by packing in too many ads, or repeating the same ads too much, they buy in.”