When the streaming rush took off ten years ago, advertisers worried that they would be cut off from key TV audiences as ad-free subscriptions boomed
Now, the rise of subscription funded streaming seems to be hitting a plateau. With Netflix, Amazon Prime, Disney+ and Apple+ all pumping out content like there’s no tomorrow and ITVX, All4, iPlayer, Sky and others competing for attention. We may have reached peak subscription and the market could face a shake out. As one journalist cheerily wondered — Is Netflix doomed?
And if Netflix is doomed does that mean TV advertising isn’t? In fact, can advertisers breathe a sigh of relief and look forward to a future where they are stars of screen once more, as famous and hummable as anything produced in Hollywood?
Well, the nightmare isn’t over quite yet. Yes, subscribers to the main streamers are stagnating as people switch between providers and rationalise the number of services they pay for. And yes, the biggest streamers are turning to ad-funded models as a result. But these are still early days for the new advertiser-funded video on demand services (AVOD), and it’s far from clear how these ad-funded tiers will be received by consumers. A sure sign that subscription funded streaming is past its glory days is the launch of advertising supported tiers for Netflix, and soon for Apple TV+ and Disney+. Prime is already experimenting with ad-funded content.
However, media buyers were disappointed with the Netflix launch of its ad-funded tier in October. What should have been a unique proposition for advertisers was, in reality, quite limited.
Netflix didn’t know what they had
There was a lack of audience information, they didn’t seem to know who was watching and they didn’t know the size of their audience. And they didn’t seem to have a clear idea on the percentage of their existing audience that would be cannibalised and move to the cheaper plan. They thought the £4.99 ad-funded package would entice new customers, rather than eat into its existing customer base.
We’re still in limbo about all of this, as Netflix hasn’t released any figures about the ad-funded tier. But their offer to advertisers was bland. It was a basic offer with targeting options, the same kind you’ve no doubt seen on VOD in the last 10 years. There’s little excitement about their offering in pre-roll or mid-roll opportunities. I hope this improves. Perhaps later on this year, or even this quarter, they’ll start rolling out pre-roll ad slots to precede the trailers for series and films. There’s so much potential to run ads around the content, and I’m surprised they haven’t already brought that to market.
Perhaps they’re reluctant to make the ad-funded tier too attractive, and worry how it will impact the main service. For many viewers, the whole point of Netflix is that it is an alternative to mainstream TV, as it doesn’t interrupt the viewing experience with ads. Paying a subscription and having ads as well could seem like the worst of both worlds.
Brands are also waiting for the media prices to come down before they commit to advertising on the channel. Netflix has a basic cost-per-mille (CPM) of £50. That is a punchy price compared to more competitive rates from proven services, such as ITVX, All4 and especially Sky. The entry price for Sky is CPMs at about £30, and that is with a plethora of targeting options. It will be interesting to see what Netflix does as the year progresses.
Advertisers are waiting with bated breath to see what Disney+ offers in its ad-funded streaming service
The sheer volume of inventory on Disney makes it interesting for advertisers. The catalogue spans Disney, Pixar, 20th Century Fox as well as Marvel Studios, Lucasfilm and National Geographic. When the ad-funded tier comes to market that could be very disruptive. And I think it’s likely that a lot of VOD ad budgets will shift into that service.
It does appear that brand advertising is going to be an essential ingredient of TV content for a long time to come. But we’ll have to wait and see how serious the streamers are about their ad-funded tiers before we get the full picture.
Featured image: charlesdeluvio / Unsplash
