Why Streamers Are Turning To Ads For New Growth

 The heady days where streaming was synonymous with no ads are now behind us. Yet what has created this apparent flip-flop on the original allure of the medium, and why are fans and studios both happy to put up with the reintroduction of advertising to their ad-free streaming world? Blake & Wang P.A’s entertainment lawyer, Brandon Blake, looks at the phenomenon.

                                                       Brandon Blake

AVOD Introductions Boom

At this point, it’s hard to find a streamer who isn’t offering a discounted AVOD tier. If it’s not already a live feature, it’s coming soon. Even Disney+ has turned to ads, with a rollout later this year. Hulu, of course, has always offered AVOD tiers cheaper, and Paramount+ onboarded the idea last June. While Netflix hasn’t yet added AVOD, they’ve also not ruled it out entirely.

 

For most, the primary draw is the ability to offer a tier-based discount in return for the marginal extra inconvenience. In turn, this opens streaming services up to several demographics who otherwise wouldn’t be able to afford another premium subscription.

It’s a solid way to optimize long-term revenue and subscriber growth, as well as increase profit pools, without much push-back from viewers who realize it’s the price they pay for a cheaper sub. 

Subscribers Wanted, Apply Through AVOD

Subscriber growth is the factor that’s going to separate the wheat from the chaff as the domestic streaming market slows post-COVID. Many of the newer streaming services still have lofty subscriber goals to meet, and the hungry market there was in 2020 has now faded considerably. It makes business sense to ensure that subscriber numbers can still comfortably grow without purely relying on premium tier uptake. Plus, let’s be honest- there’s a reason advertisers are still a key focus for Pay-TV services. Their dollars speak. 

 

That’s not to say it’s the be-all and end-all of programming. Stats suggest that as many as two-thirds of consumers still appreciate services that keep ad intrusion to a realistic minimum. Film content, in particular, is something consumers want to enjoy without drama-busting ad breaks at every opportunity.

The key for AVOD subscription tiers will be in carefully balancing how, and when, they present their ads to subscribers, and we could well see some thrive or fail depending on how well they balance this need.

 

All the same, discounted AVOD tiers as a new subscriber lure do make sense for the streaming environment, and it’s a phenomenon we’ll likely see gain a lot of traction this year and beyond. AVOD is here to stay. And no one seems to be upset by it, honestly.