Family sitting on the couch watching AVOD streaming services.
What are the benefits of AVOD streaming video services? In part one of Penthera’s four-part Understanding AVOD educational series, you learned what VOD is and what it means. Part two covered AVOD business models and top AVOD platforms, and part three detailed the AVOD market size and growth. In this part, you discover the benefits of AVOD streaming video, including the current state and possible future of the AVOD market.
Key Takeaways
AVOD streaming growth is outpacing SVOD growth
AVOD publishers, content providers, and advertisers benefit from a larger viewer base, while viewers enjoy more content for free or at a lower price
Soon, expect more AVOD services to enter the market, more SVOD services to offer ad-supported tiers, and more marketers to embrace AVOD advertising
Also, expect AVOD providers to embrace newer technology and use Penthera’s 2nd Look and similar solutions to help solve the problems that have plagued their ad serving
The Current State of AVOD Streaming Services
The market for advertising-based video-on-demand (AVOD) services is large and growing. According to Comscore’s 2022 State of Streaming report, the number of U.S. households streaming AVOD services increased by 29% from 2020 to 2022, compared to a smaller 21% for subscription video-on-demand (SVOD) services. The shift to AVOD provides numerous benefits to all parties involved—publishers, content providers, advertisers, and viewers.
Benefits to Publishers
With the AVOD market growing rapidly, publishers can attract more and more varied advertisers. This growth increases the advertising revenue base and AVOD profits across the board.
The growth in AVOD viewers and revenues also helps publishers attract more and different content. Content creators who have previously shied away from advertising-supported services may be thinking differently now, increasing the variety of content available to AVOD services and viewers.
Benefits to Content Creators
Content creators share in that growing pie as ad revenues continue to increase. Not only are there more AVOD services to sell to, but those services are also bringing in more advertising revenues as their viewership increases. That helps distributors of older content generate a bigger return on fixed investments and provides more money to fund the creation of new content.
Why AVOD is important to indie film distributors.
Benefits to Advertisers
Advertisers benefit from having a larger AVOD viewer base to advertise to. In past years, viewership numbers for any given AVOD service or channel within a service were small. Greater support for AVOD services means more viewers watching each service and each channel on a service. More eyeballs mean a bigger advertising investment return, making AVOD an increasingly viable alternative to traditional broadcast and cable advertising.
Benefits to Viewers
Viewers obviously benefit from the growth in AVOD services. With inflation rising, viewers are tired of subscribing to multiple SVOD services, most of which continue to raise their rates regularly. The State of Pay TV, OTT, and SVOD 2022 report by Horowitz Research found that in 2021, streaming viewers spent $75.80 per month on SVOD subscriptions. That’s up $26 per month from the previous year, an increase of more than 50%.
The trend to more and higher-priced subscriptions is simply unsustainable, as witnessed by a study of LG smart TV customers by research firm DeepIntent. This survey found that 64% of streaming viewers would rather view ads than pay more for a subscription service. Viewers benefit from the free content on AVOD services and will continue to do so in the future.
The Future of AVOD Streaming Services
The current state of AVOD streaming video benefits all parties involved. However, more changes are in store for the future, and those changes can further benefit publishers, creators, advertisers, and viewers.
More Pure AVOD Services Enter the Market
The past two years have seen several new AVOD services enter the market. Some of these new services, including Freevee, Peacock, and Pluto TV, have already gained significant footholds in the market. Expect more players to enter the AVOD market to grab a share of the advertising revenue.
Viewership share of AVOD market.
More SVOD Services Adopt Ad-Supported Tiers
An adjacent trend to the growth in AVOD services is the adoption of ad-supported tiers by formerly SVOD-only players. Hulu already offers such hybrid services, with a lower-priced ad-supported level and a higher-priced ad-free subscription. Netflix is launching a lower-priced ad-supported tier in November 2022, as is Disney+ in December. Expect other SVOD services to follow suit.
More Advertisers Flock to AVOD Services
As the number of AVOD viewers continues to grow, expect more and more varied marketers to embrace AVOD advertising. Traditional marketers who may have been reticent to embrace streaming video in the past are becoming convinced of the viability of AVOD advertising. More advertisers mean more competition for available ad space, which in turn means a likely increase in ad rates benefiting publishers and content creators alike.
Biggest U.S. AVOD services by revenue.
More SVOD Services Adopt Ad-Supported Tiers
An adjacent trend to the growth in AVOD services is the adoption of ad-supported tiers by formerly SVOD-only players. Hulu already offers such hybrid services, with a lower-priced ad-supported level and a higher-priced ad-free subscription. Netflix is launching a lower-priced ad-supported tier in November 2022, as is Disney+ in December. Expect other SVOD services to follow suit.
More Advertisers Flock to AVOD Services
As the number of AVOD viewers continues to grow, expect more and more varied marketers to embrace AVOD advertising. Traditional marketers who may have been reticent to embrace streaming video in the past are becoming convinced of the viability of AVOD advertising. More advertisers mean more competition for available ad space, which in turn means a likely increase in ad rates benefiting publishers and content creators alike.
How marketers adjust video ad spending.
More AVOD Services Offer Original Content
With more ad money flowing into AVOD services, expect some providers to start offering more original programming to supplement their primarily “classic” content. Amazon’s Freevee typified this original content trend with the launch of Bosch: Legacy, Sprung, and Leverage: Redemption. Crackle, the Roku Channel, Tubi, and Vudo also introduced a substantial amount of original programming over the past two years—and expect this trend to increase.
Number of original titles on AVOD services, 2020 to 2021
AVOD Services Become More Technically Sophisticated
AVOD services have traditionally lagged behind SVOD services in their technical sophistication. Compared to most SVOD services, the typical AVOD service is limited to standard definition or, at best 1080p high definition and stereo sound. Expect this to change in the near future, with more AVOD services embracing 4K resolution and surround sound for newer programming and some offering cloud DVR recording and program downloads.
Penthera’s 2nd Look
AVOD publishers are also working hard to overcome technical issues that have plagued programmatic advertising on AVOD services. Viewers are unfortunately familiar with the results of these issues, including:
Empty ad slots
Repeated ads
Delays in ad startups
Irrelevant ads
Penthera aims to mitigate these ad servicing issues with its 2nd Look solution. 2nd Look shifts the timing of when ad decisions are made closer to when the ads run, which helps AVOD providers deliver more targeted advertising to viewers and increase ad inventory fill rates. Providers get improved ad yield and higher ad revenues, while advertisers get more efficient ad spend and increased viewer engagement. With 2nd Look, everybody benefits—AVOD services, advertisers, and viewers.
Contact Penthera today to learn more about how 2nd Look improves advertising on AVOD services.
