question of the week
Does ad-supported TV have a future?
Free and cheaper ad-tier subscriptions are rising in popularity - but will the services be embraced in years to come? Will they reshape advertising or do they just hark back to the days of linear TV?
13 November 2023
It is no secret that the viewing of linear TV has been in long-term decline as streaming services have been in the ascendancy. However these too have also hit a bit of a wall in terms of revenue and growth as inflation and the cost of living crisis forces consumers to re-evaluate their monthly outgoings.
Though various (expensive) bundle deals are available, the average person would have to fork out over £70 a month to access all of the streaming platforms including the likes of Netflix, Amazon, Disney+, Hulu, Apple TV, Paramount+ and more. For the first time, the cost of paying for all of these services is more expensive than the average cable TV package of £67, according to The Independent.
Could cheaper and/or free ad-supported TV (FAST) be the answer to consumers’ financial problems, as well as provide a revenue fillip to the streamers? Netflix’s ad-supported offering has just reached 15 million monthly users globally and Paramount is set to roll out an ad-tier service imminently. Meanwhile, Amazon’s FAST service Freevee is soaring in popularity, and according to TechCrunch one in three people in the US subscribe to a FAST channel.
Some even go so far as to say that cheaper ad-tiers and FAST offerings could possibly even replace linear TV and premium streaming services altogether. But with a reliance on selling TV advertising against content, this also suggests that the industry has come full circle and is much like the TV business of old.
This begs many questions: so are FAST and ad-supported tiers that fresh of an idea? And do they really have a future? And how will brands, agencies and consumers embrace and adapt to their rise in popularity? We find out by asking a host of industry experts.
Matt Henry, Innovation Lead, AMV BBDO
Choice paralysis is a thing. Sometimes all you want to do is watch Friends ‘because it’s on’ rather than go through the ritual of deciding which streaming platform you want to spend time deciding what to watch on. When you pair that with the fact that we each spend more than £600 on subscriptions a year (Barclaycard) then I'm not surprised that ad-supported streaming is growing in popularity.
Whilst we don’t always love change, this makes sense, and there’s a world in which this shift is a win-win for both consumers and advertisers alike: Consumers get free access to the content they enjoy, whilst advertisers get voluntary data that can help us create more personal, impactful advertising that doesn’t result in the nation getting up to make a cup of tea.
As we test and learn with these new formats, I'll look forward to seeing the ROI to really understand if we can capture a bigger share of people’s attention. Ultimately though, we will continue to understand our audience better and make more personalised advertising regardless.
Alex Gardner, managing partner - entertainment, Dentsu Creative
“History does not repeat itself, but it often rhymes ...” (supposedly Mark Twain but who the fuck knows with unconfirmed quotes).
Streaming changed the game, but now that game is starting to look very familiar again – in fact a lot like the game that it changed in the first place. Streaming services are running scheduled programming of low-cost soap-like content supported by advertising (Freevee). They are also releasing the content in a staggered fashion (Disney+) and also releasing their films with a significant theatrical run and exhibition window (Killers of the Flower Moon – Apple).
So how far away are we from a world where we basically return to scheduled/staggered/linear programming and individual platforms catering for specific target audiences (much like the old “channels" used to)?
Ultimately “still quite far”, as the fundamental elements that it disrupted remain and audience expectations have now irrevocably shifted. But what has happened is that through a combination of platform competition and economic pressure (for consumers and platforms alike) it has had to adopt some of the good commercial practices that previously existed in a kind of hybrid model.
It seems unlikely that there is room within most consumer’s budgets in these economic times to retain a full armoury of the big content subscriptions, which would run to about £250 a month. (Sky and Netflix and Disney+ and Amazon Prime and Apple). Meaning they will all have to either offer something else or an utterly compelling unique audience/content synergy if they are to retain a high percentage of paid for subscribers. If not they are doomed to be predominantly ad funded, and for the time being those ad-funded models don’t look great from an agency POV.
A quick look at the individual strategies of each of them can be revealing:
Netflix – planning to be the only remaining content “panacea” option with culturally indispensable content paired a significant ad-funded option meaning it can still be “all things to all people”.
Amazon Prime – its model is not dependent on its content business winning but they do continue to strive for world dominance. Freevee is currently a quite weak product from both an advertiser and audience POV but does have the virtue of access to a huge catalogue of content and is now making some new “old looking” TV for that platform. Eventually it will nail the algorithm that will connect the potentially limitless back catalogue of hidden gems with the right audiences. Could this become the place for “cult” audiences.
Disney+ - indispensable to those with kids, sporadic ad-funded model for those without (especially as Star Wars and Marvel franchise worlds become less compelling propositions).
Sky – intelligent early decision made to own the “discovery/unilateral platform” space and invite its competitors in rather than slog it out directly against the other streamers. Really its competition now is Connected TVs. Bundles with broadband and other services sets it up well.
Pretty much everyone else will have to return to an evolved version of an older, targeted audience appeal and FAST model.
Looking at it from an advertiser's point of view, data is of course at the heart of the dilemma (as it is with everything now), something that the streamers have traditionally been extremely coy about sharing any of but is fundamentally part of the table stakes requirement of any modern media buy.
Most seem very weak in this area (with the possible exception of Amazon) - for example Netflix can only target by genre (an extremely blunt tool by today's standards), have no tracking capabilities and extremely high CPTs. The premium nature of the environment and its relatively high SOV (four minutes of ads per hour versus 12 on broadcast) help support the high CPTS but they are still as eminently ignorable as ads on linear TV.
So they have the audiences but not the propositions to leverage them – the exact reverse of the legacy broadcasters who have mature propositions but dwindling audiences.
That said, one is much easier to build than the other so once their capabilities and infrastructure catch up, the streamers will start eating even more of the broadcaster pie than they have done in the last 10 years. So if I was a broadcaster that primarily catered for a younger audience I'd be very worried, because brands' budgets are not about to get much bigger in the next three years meaning it becomes a share game and the streamers are coming for the rest of your pie …
Mark Boyd, co-founder, Gravity Road
The pendulum had swung pretty far the other way. It wasn’t that long ago that everyone was worked up about the tyranny of ad blockers and the collapse of the media business.
The reality is the contract between advertisers and viewers had been in a poor way for a while. This next thing I say might be heretical to some. Some people wait with strained bladders for the ad breaks before getting up to go. Others see The X Factor bumper before asking who wants a tea.
It needed to be reviewed. Viewers get it. Paying all your mobile, wifi, TV and gaming streaming bills all adds up. What we’re all moving to is a more transparent contract. What do both advertisers and viewers expect in return for their attention?
We do need to be a bit more imaginative with new ad formats. Gen AI offers the potential to make the ads more sensitive to the context and the programme you're about to watch. The VO and visuals could reflect this. Or perhaps the rewards are more obvious. Answer a question or enter details to get the film for free.
Whatever happens, we should all welcome the reset. Good content costs. Writers have been striking to make this very point. Advertising revenues should be welcomed as they benefit everyone.
Liz Duff, head of commercial and operations, Total Media
FAST isn't a new concept, it represents an evolution of the linear model on different platforms. Providers must draw valuable lessons from the linear broadcasting world and capitalise on the benefits of digital distribution to develop the market.
Traditional broadcasters face an increasingly challenging landscape with declining revenue from linear TV and falling audiences. Adapting to the changing industry dynamics and the rise of ad-supported services is essential for their survival. As revenue and viewing in the linear TV sector declines, FAST services and ad-tier subscriptions offer an alternative path to profitability.
FAST has also emerged as a promising opportunity for UK broadcasters to establish a foothold in international markets. It provides an affordable way to test the waters before rolling out fully-fledged streaming services. This model allows broadcasters to explore new territories without the substantial investments typically associated with more traditional expansion strategies.
We could see FAST services benefit from extended economic challenges, as cost-conscious consumers seek ways to reduce expenses. The cost savings of ad-supported options are undeniably attracting viewers. These services must retain these trialling users long enough to establish viewing as a habit, making them more valuable to advertisers.
While the cost advantage of FAST is undeniable, the success of any FAST service hinges on delivering a flawless user experience. Consumers understand the value exchange between TV content and advertising. However, to attract and retain viewers, platforms must strike a balance. Excessive ad loads can deter users, while a seamless, frictionless service will foster viewer loyalty. Licensing content created specifically for advertising, as opposed to content developed as ad-free, is key to achieving this seamless service.
For advertisers, the challenge lies in creating high-quality ads that seamlessly integrate with the content. Amazon's initiative to produce ads for smaller, digital-first brands in return for them investing in streaming TV underscores the importance of maintaining content value. High-quality ads not only maintain content integrity but also add value to the viewer's experience.
The growth of ad-supported subscription tiers, such as Netflix's, is further proof of the ad-funded model's expanding influence. This growth is partially driven by efforts to combat password sharing and is expected to continue with other streaming giants, like Disney+, following suit.
FAST isn't a radical departure but rather an evolution of the linear model on different platforms. New entrants to the market must draw lessons from the linear broadcasting world and leverage digital distribution's benefits to develop this new market effectively. Adapting to FAST's unique audience, platform, and environment is crucial for advertisers. It offers the opportunity for more dynamic and engaging ad formats, fostering immediate response and enhanced measurement capabilities.