In an era when streaming platforms seemed to promise a reprieve from traditional television commercials, 2023 marked a significant shift. Streaming services increasingly feature advertisements as major players like Netflix, Disney+, and Amazon Prime Video embrace ad-supported models. This trend is reshaping the viewer experience and the business dynamics of the industry.
Over the past year, the presence of advertisements on streaming platforms has become unavoidable. What first appeared as a trial in ad-supported tiers for cost-conscious consumers is now a dominant feature, with services such as Netflix and Disney+ leading the charge. Amazon’s introduction of ads on Prime Video this year instantly expanded advertising’s reach to more than 100 million viewers across the United States.
The analytics firm EMARKETER anticipates streaming advertising to reach half the volume of linear-TV advertising by 2024, with predictions for parity by 2027. Interestingly, platforms offering ad-supported services are reporting increased subscriptions. Antenna, a data analytics company, noted that in May, a significant number of new subscribers chose ad-supported options across five prominent streaming services—compared to just two a year earlier.
Disney executives highlighted during a recent earnings call that around 60% of their new subscribers in the U.S. opted for ad-supported plans, representing 37% of their total U.S. customer base. Meanwhile, ad-supported free services such as Fox’s Tubi, Paramount’s Pluto TV, and The Roku Channel are experiencing a similar uptick in viewership. According to Nielsen, these services, along with YouTube, accounted for 14.8% of all viewership in July, up from 12.5% the previous year.
Jonathan Miller, chief executive of Integrated Media Co., describes this resurgence of ads as a return to the dual revenue model historically successful in cable television. He notes that advertising combined with subscription fees has always been a financially viable strategy. This dynamic informs content decisions, as streaming platforms are increasingly focused on sports and live programming due to their ability to attract large audiences and advertisers.
Although streaming ad loads have increased, they remain below those typical of cable television. MediaRadar reports that ad volume per hour of entertainment averaged six minutes in September across leading ad-supported platforms, up 9% since Netflix and Disney ventured into ad-supported streaming in January 2023. Yet, this is considerably less than cable’s often 15-plus minutes per hour. Live sports, where viewers are accustomed to commercial breaks, are less impacted by this increase.
Amazon and Warner Bros. Discovery have announced plans to introduce more ads in 2025. However, their strategy will maintain lower ad volumes compared to other services, suggesting room for growth in ad capacity while preventing potential viewer backlash. As the streaming ad market expands, some advertisers express caution to avoid alienating viewers who are still adjusting to ads in this medium.
Innovative ad formats are emerging to enhance engagement and prompt consumer interaction. Ads are evolving beyond simple viewership, aiming to inspire action. Such developments are evident in initiatives like Warner Bros. Discovery’s “Shop with Max,” which aligns products with scenes in shows, allowing immediate purchases. Fubo’s introduction of interactive formats, including trivia and polls, claims increased purchasing likelihood compared to standard ads.
As the industry progresses, the evolution of ad strategy on streaming platforms is inevitable. Jessica Brown from GroupM notes the increasing prevalence of interactive ads, with streaming partners actively pitching these formats for better engagement metrics. The focus is on crafting content that not only captivates but converts, reflecting a growing sophistication in the advertising landscape.
The landscape of streaming TV is rapidly changing as advertisements become integral to the business model. Although this shift has raised some viewer concerns over ad loads, it has also created new opportunities for more interactive and engaging advertising experiences. As streaming platforms continue to refine ad strategies, the interplay between viewer satisfaction and advertising revenue will be crucial in determining their future strategies. With the integration of ads into the streaming experience gaining momentum, it’s a trend that seems set to continue.
Source: Businessinsider
