Perhaps the most noteworthy thing about Netflix’s solid Q4 subscriber growth was the company’s ongoing success with a pure ad-free subscription model. Netflix is becoming even more unicorn’ish among big video providers in completely eschewing ads. Virtually every other major video provider (aside from established premium TV networks like HBO, Showtime, etc.) is reliant, at least in part, on advertising (Amazon’s ad-free approach gets an asterisk because of the outsized role Prime/free-shipping still plays - and even Amazon is now integrating ads in various ways, see below).
In fact, though we’re barely a month into 2019, there are signs everywhere of advertising’s growing role in the future of the video industry.
Consider just the following:
Hulu lowered its price on ad-supported SVOD
Hulu actually LOWERED the price of its ad-supported SVOD service from $8/mo to $6/mo, while leaving the price of ad-free service at $12/mo. With no plans to increase the number of ads, Hulu is betting that increasing its ad-supported subscriber base is strategic, no doubt also believing it can steadily boost the value of its inventory (an assumption I agree with).
Viacom acquired Pluto TV for $340 million
Viacom acquired Pluto TV, an early-stage, ad-supported streaming service with 12 million users, for $340 million. When Viacom, a stalwart member of the pay-TV world, decides to shell out for a service that does NOT receive any monthly fees from pay-TV operators, it’s a pretty big vote of confidence for video advertising. And likely a smart one. Pluto’s 12 million users are a drop in the bucket compared to Viacom’s TV networks’ global reach, but an important launch pad for migrating more of Viacom’s content in an ad-only model, offsetting declining subscriber fees from cord-cutting.
YouTube TV rolled out nationally
YouTube TV continues to be the most intriguing of the virtual pay-TV operators for a wide variety of reasons. Less than 2 years after its launch, and following a methodical rollout to certain geographies, YT TV threw open its doors to virtually all Americans last week. Remember, Google’s long-term hypothesis here is that with Google’s mountain of user data, YT TV can monetize its video inventory incrementally higher than traditional TV networks monetize can with theirs. The national rollout suggests Google likes the early proof points it is seeing and is therefore putting the pedal to the metal.
NBCUniversal announced its direct-to-consumer service (as have others)
Though NBCUniversal’s new DTC service won’t come to market until early next year, the announcement was a clear signal to advertisers that its prime inventory will be available in streaming and with ads soon. Add NBCU to the list of other big media companies forging ahead (Disney, WarnerMedia, etc.) with streaming services that will rely, at least in part, on advertising.
IMDb Freedive launched into a crowded market
Amazon’s IMDb Freedive is the latest way to access free movies and TV shows, supported solely by ads. Following The Roku Channel, YouTube’s renewed emphasis and numerous others, it’s clear there will be more ways to access free content than ever - and more premium video ad inventory than ever.
The above items are just the tip of the iceberg in the frenzy of industry activity around ad-supported video content. Successful pure subscription models like Netflix’s are increasingly unique. Beyond this Sunday’s Super Bowl glitzy ad showcase, industry executives are fast realizing that the targeting, interactivity and dynamic insertion benefits of video ads are the industry’s ultimate way to revitalize the business and score.
(Note, we’ll be exploring all of the above and more at our 9th annual Video Advertising Summit on May 29th in NYC. Save the date!)