In today’s fast paced world gathering attention for online content has become a challenge. This requires companies to create a new idea for the old model. The latest trend therefore has seen a lot of traditional content makers adopting newer business models.
Experts allege the move to digital platforms comes with enhanced benefits, some of which include precision and greater efficiency. This further also helps media and entertainment (M&E) companies to experiment advertising with content. It is due to this that over-the-top (OTT) advertising-supported video have gained so much significance in the recent year, rising to the level of “TV on the internet.”
The recent trends allege media and entertainment companies are becoming more conscious of developing direct-to-consumer (DTC) video streaming services which are often also ad-free. Based on a study conducted by Deloitte’s 13th edition of Digital media trends survey, it was observed that M&E companies are now reconsidering the role of advertising as they are building several latest digital offerings.
Today advertising plays a major role in how content is funded and distributed. It is however observed that as the industry changes to new digital models, companies are increasingly analyzing how the digital models can be used further to augment growth.
The increasing prevalence of competition among M&E companies is especially becoming evident as majority of the companies are embracing the change from traditional distribution models to newer DTC models. Furthermore, larger media companies are also taking on direct distribution strategies and becoming more aware of their engagement with consumers.
In the past five years, the industry has seen an ascending growth, owning to development of more than 300 streaming video services which include ad-free and ad-supported models. Study suggests this figure pertains to United States alone. Furthermore, the scenario is likely to change, given the several high-profile launches within the next 12 to 18 months from media giants such as Disney, Apple, WarnerMedia and Comcast.
Several new services today are adopting ad-free subscription model. Through this model consumers usually pay a fee for a month. This also allows them to access broad content libraries. Furthermore the survey suggests that companies need to become more flexible and open when it comes to pricing strategies and monetization.
Experts also believe the growth of streaming subscriptions can be affected through a subscription-related frustration, also commonly known as “subscription fatigue.” This term especially finds relevance in today’s entertainment scenario considering the drop in high-profile content which is available on large aggregators such as Amazon and Netflix.
Results of the survey
The survey results conclude; more than half of the consumers wish to view advertising with video programming, if the subscription costs are less. Secondly, younger consumers who are believed to have less tolerance for advertising, usually consume a higher proportion of ad-supported streaming content as compared to average level for younger consumers. Thirdly, consumers who stream video cannot be encouraged by ad-free models following them to subscribe to a new streaming service as compared to nonvideo streaming consumers. Lastly, the price plays a more important role than removing ads which entice service subscribers to use an additional service.
Results show that in today’s times it would not be wise to have an easy attitude to a strategy which depends on disrupting video viewing. Additionally, experts suggest that frequent, repetitive, irrelevant and long advertising is likely to hamper user experience. Not all advertising models are known to be of similar nature. It is believed that a large number of consumers are more attentive to ads which last for 10 or 30 seconds. There is also a significant group that is more willing to exchange personal data for an enhanced experience and at a reduced cost.
Over-the-top services and platforms
The increasing competition for space in the market of video streaming has resulted into a growing trend of over-the- top (OTT) platforms and services, in addition to a growth of content availability and creation. Experts allege the number of scripted TV shows on Netflix and Amazon have increased beyond broadcast networks. The completion in content is so fierce that even A-listed shows struggle to rise at the top of the charts.
Advertising on video platforms
The current industry trends indicate that consumer’s frustration with traditional video ecosystem is connected with declining TV subscriptions, while the number of DTC account activations have increased. Advertising breaks are associated with traditional TV and even if they appear today on online streaming, they are seldom welcomed. Figures suggest only 8 percent of US consumers believe advertising can be disruptive only to a ‘low’ degree across platforms including those on TV and desktop consumers. On the other hand 92 percent consumers believe advertising is either moderately or highly disruptive and remains so across all platforms. Experts however also believe that if advertising is unwelcomed by majority of consumers, there are also consumers who are pragmatic with regards to the exchange between content and advertising.
The study therefore tried to find out how many ads can be tolerable for consumers, i.e. a number of total minutes of advertising per hour which would be considered ‘about right’, if not zero. The survey results concluded that about 10 percent said zero. It can therefore be inferred that despite the disruptions caused by advertising, consumers can tolerate and accept exchange value that come along with content and advertising.
Consumer’s reaction to advertising
It is further believed that consumers who have a relatively low tolerance for ads and those who cannot even tolerate the consumer average of eight minutes of advertising per hour, usually tend to watch fewer hours of broadcast TV per week than an average consumer. This attributes to a 15 percent variance in broadcast TV consumption among consumers with low tolerance and average viewers for ads. Experts also suggest, consumers who are less tolerant to ads tend to watch ad-supported streaming services in comparison to those who have a greater tolerance to traditional TV. This trend was especially observed among millennials, boomers and Gen Z.
Figures suggested people with highest sensitivity to ads watched 4.6 hours of ad-supported streaming per week as compared to 3.9 hours for all consumers. Gen X consumers with low tolerance on the other hand watched more paid streaming services. These generally watched more ad-supported video content as compared to low tolerance consumers belonging to all generations.
The latest industry trend also suggests that M&E companies are increasingly looking out for the most suitable content for ad-supported video-on-demand (AVOD) services and also organize their platforms accordingly. By referring to only data information, the study compared “favored content types” to advertising tolerance (minutes per hour) and the proportion of streaming time spent on paid streaming services. It was observed that people who preferred sitcoms and dramas were more likely to stream via a subscription video-on-demand (SVOD) services as compared to the users who preferred to watch sports, movies and children’s shows. The results finally conclude that 45 percent of consumers who are more prone to streaming video usually spent four or more hours every week watching movies.
Advantages of ad-supported video streaming
The benefits of a dynamic advertising solution and a fair exchange via ad-supported DTC services can be determined as: Lower ad volume/frequency- It is believed that on an average a one-hour drama will have 42 minutes of program and 18 minutes of commercials. This comes down an ad load of 30 percent. Through an OTT service, a TV drama episode will have five minutes of commercials which will further also have an ad load of 10 percent.
Dynamic/customizable- With reference to technological difference between pay TV and TV network, content distributors found the transition to dynamic advertising difficult. Furthermore, since most of the streaming services use an IP-base, it becomes easier to deliver and present more contextualized advertising. A combination of streaming video along with data-driven advertising can help to establish efficient market for exchanging personal data for content.
Cheaper: Content nowadays has shifted more with respect to content owner’s unique streaming services. Subscriptions as a result must remain contend by managing multiple subscriptions. The challenge therefore doesn’t restrict alone to managing multiple login credentials. The survey results indicate that more than half of consumers preferred streaming video programming with advertising if the cost of subscription was reduced.
The study also concluded that DTC streaming video as a potential monetization platform is not necessarily a good option. It was observed that not all well-funded ventures that offer great content and talent are successful in the DTC market.
Furthermore, over the past five years, it was observed that streaming services in affiliation with studios and content creators have cancelled their subscription for on-demand video services. Even if the companies varied in content and price points, they generally preferred ad-free subscription models.
The future of advertising
As Hollywood studios make an entry into the DTC streaming market, it is alleged that the amount of content licensed to third parties will reduce considerably in order to build value for new services. This further also indicates that as more content rights revert to original holders, there will be less content which will need to be licensed and will diminish the viability of third-party OTT services. Furthermore, experts allege viewing will also become more focused across big content companies. This is likely to cause a problem among large OTTs which have given up on transactional video-on-demand revenue along with third-party licensing fees in order to draw more subscribers. Furthermore it is believed that the potential for opportunities of lost content monetization can also encourage them to consider ad-supported video, along with current models, monetization of premium content and participation in the high-value streaming behavior of consumers, rather than depending on a flat subscription fee model.
Tags : over-the-top (OTT) advertising, direct-to-consumer (DTC) video streaming services, media and entertainment, advertising(M&E) companies,