In April 2022, Penthera President Brian Kline penned “Why Ad Support Has Always Been The Answer.” Some 18 months later, we are seeing the large streaming publishers increasing their ad-free SVOD pricing. While it is easy to assume this is just a way of getting more revenue from SVOD, the more interesting result is that the ad-supported “AVOD” tiers are now much more attractive to consumers. Building off Brian’s future-proofed insights, it’s never been more obvious publishers see their ad-supported tiers as the answer to their ongoing revenue challenges.
Why? Publishers know that larger audiences on their ad-supported offerings will build the scale needed to attract increased advertising dollars. For ad-supported Video on Demand streamers to eventually justify lofty CPMs in a competitive, programmatic-driven world, they need eyeballs … lots of eyeballs.
Yes, AVODs can boast of their ability to reach a brand’s target audience more efficiently than legacy cable/satellite/broadcast, but despite all the talk of better targeting, ad measurement data, and alternative measurement currencies, brands desire the mass reach traditional linear still offers, especially if live sports is an advertising option.
So AVODs need scale to grab advertisers’ collective attention. To get there, they are trying to motivate consumers to make the move to ad-supported by hitting their wallets.
Courtesy of an October 3 Yahoo! Finance article, here is a summary of the price points for the leading streaming services. As we know, increases on the SVOD side are becoming commonplace. The ad-free versions of Disney+, Hulu, and ESPN+ are increasing by 20% this week, and Netflix, by all reported accounts, on the heels of a major executive shakeup, is increasing its SVOD plan as well. Prime Video is adding ads to its basic tier and charging $2.99 additional for ad-free viewing.
According to reports, the actors’ strike getting settled and the changes this will create is a convenient reason for the SVOD price hikes. Coincidence or not, it has added fuel to the ad-supported push by making AVOD pricing even more attractive.
What is driving the consumer’s shift to advertising supported tiers? As more and more households become multi-generational, it will not be unheard of for households to have all the streamers featured above. Much like cable tiers once offered something for everyone, now streamers are doing the same. So quick math: if a household had all SVOD tiers of the above streamers, the monthly cost is approximately $100. The cost of having all the basic ad-supported plans is $50.00. That’s $600 more a year for SVODs and that does not include AppleTV+ and Amazon Prime based on the chart and provided price points.
So now what?
By all accounts and projections, publishers’ ad-supported push will work. According to a recent Digital TV Research report, global AVOD revenues will increase 90% between 2023 and 2028, reaching $91B. SVOD revenues, on the other hand, will increase just 16% during this same period. These projections paint a rosy picture for the future of ad-supported plans.
Penthera helps AVOD publishers maximize ad-revenue by reducing common errors and inefficiencies in the ad insertion process. This makes existing ad insertion technology work better and increases the value of publishers’ inventory and, as a result, ad revenue.
If you’d like to learn more about what our data and insights say about the future of AVODs, contact us today to schedule a call.