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  • Writer's pictureJoe Walsh

2023 In Review: Ad-supported, SSAI, Render Rates Prioritized; Bundle is Back?



With 2023 coming to a close, it’s fair to say this will be the year remembered for when the linear-streaming scale turned to the latter. As Nielsen reported, Linear dropped below 50% of total TV usage in the United States for the first time ever this year. With growing content libraries and live sports increasingly being added to streaming services, there’s little reason to think this trend will slow down in 2024.  


Here are other critical trends and developments that mattered most in 2023:


CSAI to SSAI Migration Speeds Up: Throughout 2023, one thing became abundantly clear in our discussions with leading ad-supported streamers: Server-Side Ad Insertion is the preferred choice over Client-Side Ad Insertion. In a competitive marketplace with churn rates being a top-of-mind concern, AVODs know most consumers want a viewing experience that best resembles that of traditional broadcast technologies. This is where SSAI has a clear advantage over CSAI.


 

Render Rates Take Center Stage: As we wrote back in September, at IBC 2023, one thing was very clear: publishers want to fix their render rates. For what it’s worth, in retrospect, “want” probably was an understatement. Amidst a soft direct-sold ad market that shows no signs of improvement in 2024, the continued shift of eyeballs and advertisers to CTV, and a programmatic marketplace expected to exceed $20 billion in a few years, publishers need to fix their render rates is more appropriate.


With programmatic buying systems from SSPs and DSPs placing less value on inventory with low render rates, there is little doubt that this KPI will be critical in 2024.  


Penthera has a unique perspective on the challenges with render rate because we are always talking to publishers about their low render rates and how much revenue they are losing as a result. Our 2nd Look product fixes low render rates for AVOD publishers. To learn more, get in touch or check out 2nd Look on our site.



Ad-supported Has Its Moment: We like to say the future is ad-supported. As we turn the calendar to 2024, it’s time to change “future” to “present.” 


As we wrote in October, publishers, in pursuit of scale, view ad-supported tiers as the answer to their revenue challenges. To get to this preferred destination as quickly as possible, in 2023, publishers made ad-supported more financially desirable with SVOD price increases becoming commonplace. It is now common for the SVOD tier to be twice as expensive as the ad-supported tier for leading streamers.


According to a Digital TV Research report, the plan to focus on the consumers’ wallets should work. Global AVOD revenues are projected to increase 90% between this year and 2028, reaching $91 billion. SVOD revenues, on the other hand, will increase just 16% during this same period. 


Why focus on ad-supported? Beyond the fact that Netflix and Max (Warner) say they make more money from the ad-supported tier, subscription-plus-ads is the dual-revenue business model that the entire TV industry was built on. Right now, these services need to build their ad-viewing audiences to attract advertising dollars. Over time, dual-sourced revenue will give streamers two levers to pull when they need to find revenue growth (subscription price and ad load).



The Bundle is Back?: The significance of the “bundle” being in media headlines in 2023, especially at the end of the year, cannot be understated. And to echo the earlier stated theme of “the present is ad-supported,” the new bundle looks mostly to be all about ads.


Earlier this month, Verizon announced users can get both the ad-supported tiers of Netflix and Max for only $10 a month. Based on current pricing, with Netflix at $6.99 and Max at $9.99 each month, the bundle price represents a 40% discount. The provider also announced customers can pay $10 a month for a Disney bundle, which includes the ad-supported tiers of Hulu and ESPN+, and the ad free tier of Disney+. Not long after this news, it was reported that AppleTV+ and Paramount are having early discussions about a DTC bundle. (Read more in Forbes "Streaming Bundles And Limited Promos Offer TV Subscribers New Savings")


When you combine the mindsets of budget-minded and top-tier content-seeking consumers, scale-seeking streamers, and eyeball-seeking advertisers, there’s little reason to doubt “bundle” will be in lots of headlines in 2024. 


Life in the FAST Lane: Amidst all the talk of consumers’ wallets, SVODs, AVODs, bundles, and price points, Free Ad-Supported Streaming continued its meteoric rise in the U.S. in 2023. Led by stallworths like The Roku Channel, Samsung TV Plus, Pluto TV, Vizio Watchfree+, and Tubi, according to Samba TV’s 2023 “State of Viewership” report, one in three Americans regularly watch a FAST provider, and there are no signs of this slowing down. 


And again, it all comes back to ads. Speaking of those eyeball-seeking advertisers I mentioned earlier, according to The 2023 State of FAST, a new report from Xumo and Comcast Advertising, 84% of ad buyers already in the FAST ecosystem plan to increase their FAST ad spend in 2024. This builds on increased FAST investments this year compared to 2022. 


Like AVODs, in 2024, it will be critical for all FAST services to provide quality, cable-like viewing experiences to their growing audiences, while also demonstrating render and fill rates that attract more advertising spend. 


Based on our work outside the U.S., FAST isn’t as prevalent around the world. The big question remains will FAST take off in Europe and the rest of the world as it has in the U.S. We will see!

   

Like we say, the present is ad-supported.

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