The biggest story in the world of streaming video this past year has been the growth of ad-supported services, capped off with market-leader Netflix’s high-profile announcements of its plans to launch an ad-supported tier and to partner with Microsoft to provide technology and monetization to power it.
However, the idea that making this work is only about adding ads, ad tech, ad sales and a discounted pricing tier belies what will be a much bigger shift for streamers that have previously been focused on acquiring and retaining subscribers to ad-free services.
In that world, nothing has been more successful than binge-watching. Dropping all of the episodes of a full season of a popular show all at once leads to binge-watching, lots of word-of-mouth recommendations and lots of new, resulting subscribers, many of whom will stay subscribers for another quarter or so until the next big binge-watching opportunity that fits them comes along.
For streamers, this means that continually buying a pipeline of high-profile, high-priced original movies and series has been essential. For marketers, this means heavy promotion of tentpole originals to acquire new subscribers and remind existing subs why they don’t want to churn out and lose out on the hot new shows.
This heavy programming investment model works great as long as the market for premium, ad-free subscriptions keep expanding and streamers can keep growing their subscriber bases. However, when the overall market stops growing, then the subscription fight becomes one of price, competition, discounting and churn management. Profitability turns to losses, and strategies shift.
This is where Netflix is today. More critical for the company than just adding ads will be shifting its program development and marketing strategies from a heavy binge-watching past to a franchise-building future.
The company is already talking about following a more conventional, episodic-release model where new episodes come out weekly with lots of anticipation, something that has worked for many decades for broadcast and cable TV companies, and premium subscription services like HBO and Showtime.
“Friends,” “Seinfeld,” “Law & Order” and “The Sopranos’ would never have been multichannel, multidecade franchises if they had dropped all their shows in annual binges.
As streamers shift to franchise building, and driving revenue from ad support, growing their audiences and their viewership on a predictable basis will be critical. Making viewing habitual will be existential.
Ad-supported streamers’ future will no longer be about acquiring subscriptions, but driving audience “tune-in” to shows where and when their advertisers need them. What will be their “Monday Night Football,” prime-time, morning shows and must-see TV?
Does this strategy sound archaic? Nope. Streamers won’t be able to build franchises without it.