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look for more economical ways to consume content .” CHURN . “ Difficult economic times may contribute to increased churn on subscriptions and a potential uptick for advertising supported services , as subscribers become more selective about which streaming services they subscribe to ,” says Chris Wilson , director of market development , sports , MediaKind .
“ This is definitely the case and we ’ re seeing it happening right now globally ,” asserts Pierre De Lanny , strategy director EMEA at MiQ . “ A recent MiQ study has shown that getting access to a good cross-section of SVoD service would take six per cent of each household ’ s disposable income , which is shrinking due to the current cost of living crisis hitting the country .”
“ During the pandemic , streaming services saw a steady rise in subscriptions as households became reliant on at-home entertainment and perhaps some much needed escapism ,” recalls Lolly Mason , global partnerships lead , Peach , who suggests that consumers are now suffering
from subscription fatigue , with recent data from Kantar showing that almost a million UK households dropped a streamer in 2022 . “ Hybrid , ad-supported subscriptions are becoming a savvy option to reach consumers who might otherwise part with their subscription habits .”
“ We all probably know someone who has recently cancelled at least one of their streaming subscriptions because of the increased cost of living ,” says Juliet Gauthier , strategic product manager , Red Bee Media . “ Cost-conscious viewers are looking for free alternatives and are willing to watch a few adverts in exchange for good content . Most viewers will have a few different ways they like to watch content depending on their mood and circumstances – sometimes it will be ad-supported streaming , sometimes subscription on-demand or broadcast .” NETFLIX . As to how the Netflix ad-supported tier is faring and whether other SVoDs will follow suit , Amagi ’ s Di Giacomo says that initial advertiser interest was clearly strong . “ We believe that Netflix will likely continue to work to optimise pricing and packaging for both consumers and advertisers as they learn from this initial offering . We ’ re going to start seeing a few
“ Consumers don ’ t want to cut streaming services , so they are willing to move to an adsupported tier .” - Ed Wale , LG Ad Solutions . services ramping up AVoD and FAST offerings in the near future ,” he predicts .
“ It ’ s impossible to say at this stage ,” states Ampere Analysis ’ s Bisson , noting that Netflix had admitted teething problems with targeting . “ It ’ s something that will fall into place . It was impressive to get that tier launched in fairly short order from a standing start . It ’ s not the main way they ’ ll make their money . It ’ s a nice add-on that they are quite happy to see ramp up fairly slowly . They did admit it was not particularly cannibalistic of their most valuable customers .”
According to Andrew Ward , president , Ampersand , the intersection of TV content and digital technology , which makes possible AVoD / SVoD services such as Netflix , Disney Plus and others , is driving transformation across the TV marketplace as the viewer is now in control of how , where and when they access their favourite content . “ We are seeing the emergence of new strategies to plan , buy and measure TV investments rooted in richer data , more precise delivery , multi-screen integration and more robust measurement . We believe the growth in FAST channels , or the launch of ad supported tiers such as Netflix , will accelerate this evolution .” RETENTION . “ The ad-supported tier has helped boost subscriber numbers and given consumers more choice and flexibility , but it ’ s too early to gauge how successful Netflix ’ s ad-based business is shaping up in the long run ,” suggests Edgio ’ s Friedlander . “ It ’ s fair to say that all major streaming companies are looking at ad-based models as a way to diversify their revenue streams and enhance audience retention and growth .”
Harmonic ’ s Gambino reports that the numbers he has seen say that not only is Netflix not meeting its sign-up goals , but it ’ s actually had to refund advertisers for not reaching minimum guarantees . “ This shouldn ’ t be that surprising to anyone looking in from the outside . Netflix has been around since the beginning of streaming . They ’ ve haemorrhaged content as streaming platforms have fragmented , and users are somewhat disgruntled about cancelled original programming .”
“ New projections from MoffettNathanson Research shows that Netflix ’ s ad-supported tier is expected to grow to 10 million global users by the end of the year ,” says LG Ad Solutions ’ Wale . “ These projections are expected to accelerate in future years , reflecting an appetite for ad-supported streaming among users who will either shift their existing subscription to ad-supported or new users who will sign up for the first time .” PREFERENCE . “ Consumers are increasingly moving towards ad-supported streaming services ,” says Magnite ’ s Wilson . “ In our study , the majority of viewers expressed a preference for ad-based streaming content and 82 per cent of respondents said they watch some form of ad-supported content . Alternatives to traditional SVoD models are only going to become more prevalent as streaming companies look to offer credible , competitive alternatives to one another .”
MediaKind ’ s Wilson describes Netflix ’ s ad tier launch as “ quite clever ”, recognising that people are cutting services , yet they are also exploring new options . “ Given that Netflix has become quite conventional and is used by almost everyone , it is a prime option to cut for a while . The ad-supported tier allows Netflix to offer an option to those considering discontinuing their subscription to keep giving them money without the perceived cost .”
“ Other platforms are likely to follow Netflix ’ s lead towards an ad-supported model , with the trend driven by the prevailing socio-economic conditions ,” says MiQ ’ s De Lanny . “ Brands are struggling to reach their target audiences purely on linear TV . The shift to AVoD and FAST , which boast growing audiences , will enable them to do so , especially if they want to reach a younger demographic .”
“ Despite understandable teething issues , given the speed of launch , it seems the Netflix ad-tier is starting to gain traction ,” observes Red Bee ’ s Gauthier . “ Netflix is attracting new users , re-attracting old users and – crucially – doesn ’ t appear to be cannibalising their subscription tiers . Others are likely to follow if this continues , especially if they can offer buyers opportunities that go above and beyond traditional ads ( like sponsorship deals and dynamic ad insertion ) and strong targeting .”
“ Netflix has a history of being at the forefront of trends in the industry , such as binge watching and content recommendations ,” suggests Viaccess-Orca ’ s Mangel . “ When Netflix brings forward a new streaming innovation , other players in the industry follow .” IMPLICATIONS . With major SVoDs now looking to incorporate advertising into their platform strategies , what are the implications for the wider
“ Cost-conscious viewers are looking for free alternatives and are willing to watch a few adverts .” - Juliet Gauthier , Red Bee Media .