At current growth rates,
FASTs are on track to generate more advertising revenue than cable, broadcast or subscription streaming services by 2025, according to a new report on the sector’s evolution from
television/advertising analyst TVREV.
While 2023 growth will be somewhat restrained by advertisers' economic concerns and a wait-and-see attitude due to the launch of the Nielsen One
cross-platform solution, FASTs should see particularly strong ad gains in 2024 and 2025, followed by continued, still-healthy growth.
U.S. ad revenue generated
by FAST services is expected to rise from an estimated $10.4 billion in 2022, to a projected $15.6 billion and 17% of total TV ad spend in 2023, to $33.8 billion and a 35% share by 2025, and to $42.6
billion and a 42% share by 2027 (chart above).
All subscription-based streaming services with ad tiers — termed SVODs in this report — are projected to see advertising
grow from $11.3 billion and a 13% share of total TV ad revenue in 2023 to $24.5 billion and a 25% share in 2025, and to $26.1 billion and a 26% share by 2027.
Meanwhile, broadcast
TV’s share of ad spend will fall from 23% in 2023 to 15% in 2025 and 13% in 2027, and cable’s share will drop from 47% in 2023 to 25% in 2025 and 19% in 2027.
“FAST services today are where
cable was 40 years ago,” observes TVREV founder and principal analyst Alan Wolk. FASTs have more available inventory and are “a great reach vehicle,” he says. “The most
desirable and hardest-to-reach consumers are spending most of their time on streaming, and the FASTs will be how brands can best reach them.”
Brands will see FASTs
as a replacement for cable and SVOD as a replacement for broadcast networks, so the FAST/SVOD split will continue more or less along the same lines, Wolk and co-author Mike Shields predict. But given
that there are more SVOD services than broadcast networks and that some, such as Netflix, command much higher CPMs, the split will be closer to 60/40 than the current cable/broadcast split of
67/33.
Cable networks — especially those with relatively little original content — will lose more ad dollars than broadcast networks because they’ll lose a larger percentage of
their viewer base as consumers defect to FASTs.
The authors believe that legal complications, FCC challenges and other factors will likely prevent broadcast networks from
shifting their prime-time programming from broadcast to streaming.
FASTs and streaming in general should also pick up a sizable share of local broadcast dollars as local
advertisers take advantage of lower CPMs and the ability to target consumers beyond geotargeting. In addition, streaming will take sizable chunks of elevated local and national ad spend during
election years.
Further, FASTs could reap an advertising windfall from D2C brands, if they can provide the volume of inventory and programmatic infrastructure these brands
demand.
Sports rights — including how quickly these rights shift to streaming and which services secure them—are one big wild card in the forecast. SVODs could
benefit disproportionately, particularly if it turns out that livestreamed sports on SVODs are one of the only ways to reach affluent consumers who otherwise stick to ad-free streaming content. That
could send CPMs through the roof, resulting in SVODs taking a much greater than currently projected share of ad revenue.
The report acknowledges the oft-cited remaining
problems for streaming advertising in general — including lack of standardization in measurement and buying practices, and legal and accuracy issues relating to first-party data — and some
that are currently particularly troublesome for FASTs, such as excessive ad repetition and advertisers’ inability to know the context/programming in which their ads are running.
It also points out progress in starting to address these problems, including the availability of much larger, more refined ACR data sets as smart TVs take over the market, and major
media companies’ implementation of protocols on their FASTs to prevent excessive ad repetition.
Still, while the ability to use streaming to target viewers by
demographics in streaming, like other digital media, is clearly desirable, brands more than ever value the power of the emotional engagement generated by TV content — so a lack of contextual
transparency with FASTs, in particular, is one of advertisers’ biggest issues.
Enabling contextual targeting, while not easy, would actually address a number of the
current hang-ups with FAST and streaming buys, the report’s authors argue.
Look for more on this in next week’s Digital News Daily Advanced TV Insider
column.
The report can be downloaded at no charge for a limited time.