Commentary
Streamers' True Goals For Ad Options: Just An Option, But Not The Main Target
- by Wayne Friedman , Staff Writer, November 25, 2022
For streaming platform owners, the bet is that the modest monthly fees versus that of bigger, no-ads, subscription fees will not erode overall revenue projections.
At the low end, at $4.99 a month, we have Paramount+, Discovery+, and Peacock. At $6.99, we have Netflix. A dollar higher, at $7.99, are Disney+ and Hulu. Top pricing for ad-supported service is HBO Max, at $9.99.
How do consumers shop with these numbers in mind? Do they sense HBO Max is twice as valuable as Paramount+?
And what about Netflix and Disney+ -- the presumed market leaders according to many, which are virtually tied?
Consumers adjust to perceived value -- as well as for their most favorite returning shows on a service. If legacy TV companies are giving streaming content away for free, how valuable is it really?
Now, let's drop down a bit to other services: Consider Fox Corp.-owned Tubi and Paramount Global's Pluto TV. Both completely free, ad-supported services. What's the real value there?
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As Tom Rogers, executive chairman of Engine Gaming & Media, said recently on CNBC, it's all about “engagement.” For many that specifically means how many total hours are spent on the service over a given period.
Far and away, Netflix has the highest engagement.
In plain-speak, it's all about high-performing programs. Look at any of the weekly Nielsen measured data for streaming shows for example. Netflix still dominates in almost every category.
If you are a consumer who wants the most bang for their buck, at $6.99 for Netflix's ad-supported option that can be a deal -- especially as it appears the bulk of Netflix original programming will find its way there.
And the question we are asking going forward is what Disney's returning CEO Bob Iger can do to beat Netflix when it comes to its ad-supported options -- or even whether he should. Surely the legacy TV mode of releasing one episode per week for new original shows might be in need of a change.
At the other end of the spectrum, HBO Max is at $9.99. Will that amount to anything? Do consumers have a sense that this ad option works for them?
Warner Bros. Discovery plans to merge HBO Max with Discovery+ next year, which in theory could be strongly marketed to consumers as being more valuable -- especially at the same $9.99 price tag.
At the same time, premium streamers will continue to push more of their full-fledged ad-free subscription platforms -- to continue highlighting one key financial measure to investors -- average monthly revenue per paid subscriber.
In a possible recessionary period amid a continued weakening TV-video advertising market, it's key to always keep the money rolling in -- no matter where you get it from.
Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
Dave if you define "engagement" as how much time a person devotes to the content of a streaming service,---and I'm not so sure that I buy that-----the average Netflix user spends about an hour per day with the service---and it remains to be seen what the corresponding figure is for Netflix's tiny ---but, hopefully growing---AVOD initiative. If you look at the same kinds of data for those who subscribe to other streaming services, the figures vary from one to the other---but are very close to the Netflix norms. My point being that the number of households that subscribe does not necessarily tell you how engaged individual household members may be with a service's content. For examle one of Disney+'s issues is that a huge percentage of its average minute audience consists of younsters, not adults and this is something that Iger will try to correct---I assume---in the future as it's a weak link in Disney+'s armor.