Ad-supported streaming steals the show on TV

Ad-supported streaming steals the show on TV

Signage for the AT&T Inc. streaming service WarnerMedia HBO Max is displayed on a smartphone in an arranged photograph taken in the Brooklyn neighborhood of New York, the United States, Thursday, May 28, 2020.

Gabby Jones | Bloomberg | Getty Images

During its initial annual presentation to advertisers this week, Fox ran a bogus pharmaceutical ad for what she called “Adbyva”: a product meant to alleviate the ad buyers’ problems so many viewers watch on ad-free platforms.

“Does the idea of ​​another ad-free streamer behind a paywall give you courage? Do you find yourself laughing hysterically because your [gross rating point] do the goals seem totally unattainable? “the advertisement began.” If so, you are probably suffering from Max Plus Syndrome, a condition that plagues many ad buyers today. ”

With so many eyeballs go to streaming, networks want advertisers to flock to their ad-supported streaming offerings. This sentiment was especially evident during this year’s TV presentations, which kick off a season where advertisers typically spend a large portion of their annual TV spending in deals.

Comcastfrom NBCUniversal, Fox, Discovery, Disney, AT&TWarnerMedia and ViacomCBS made digital presentations to advertisers this week and focused on ad-supported offerings like Peacock, Hulu, and HBO Max with Ads. (And outside of the introductions, the real focus this week was on the news that AT&T would have combine its WarnerMedia content unit with Discovery in a $ 43 billion deal, which was briefly mentioned in opening remarks but largely left out in pre-recorded company presentations).

Streaming Ads

Although streaming has historically been dominated by ad-free paid subscription platforms like Netflix, ad-supported services are gaining traction, according to eMarketer. In January 2021, 34% of U.S. households with video streaming capability were using ad-supported streaming services, up 6 percentage points from January 2020, according to Nielsen data. This applies to both ad-supported video-on-demand platforms and linear streaming.

“Cable networks are increasingly touting their streaming offerings as a way to reach viewers outside of the pay TV package,” Wells Fargo analysts wrote in a note earlier this week. “Tubi was the focus of Fox’s Upfront presentation, with the company repeatedly claiming that its AVOD offering is free unlike some of its competitors. Similar to Fox, NBCU has put Peacock in the spotlight.”

But broadcasters are reluctant to turn off consumers with repetitive ads and long commercial breaks. That’s why they’re looking for ways to change what a consumer might think of as a typical TV commercial break.

During its presentation, for example, WarnerMedia touted its upcoming ad-supported service, promising light ad payloads and less invasive ad types. Executives said the platform will use “paused ads,” a type of ad already in use on platforms like Peacock or Hulu, and “brand discovery,” a way for advertisers to deliver ads. ads where consumers decide what to watch.

Initial spending on digital video advertising is expected to reach $ 6.88 billion in 2021, up 42.5% year-over-year, according to a report published Friday by eMarketer for Insider Intelligence. He also estimates that advertisers will spend $ 19.9 billion in the early stages, near pre-pandemic highs.

But with such a proliferation of streaming options, with even ad-supported options coming at relatively high fees (HBO Max with Ads, launched in June, will cost $ 9.99, down from its ad-free price of $ 14.99 per month), it’s unclear how many services consumers will use.

“This will be an absolutely fascinating study of consumer behavior over the next two years,” said Jim Nail, senior analyst for B2C marketing at Forrester. “I think in the mind of the consumer it’s like I have to put up with ads, it should be basically free. If I pay for anything, I shouldn’t have to put up with ads. But then again. , that’s rational analysis, it doesn’t work. ” t necessarily reflect the reality of what they are going to do. ”

Another kind of initial season

the the pandemic derailed the typical initial situation last year, with advertisers looking for shorter engagements and more flexible deals with TV companies.

It set the tone for the change in the way things traditionally worked. At a CMO Exchange event for CNBC earlier this month, Procter & Gamble Brand manager Marc Pritchard spoke about his desired changes in the initial process, which he publicly called “obsolete”.

He said the first items were an outdated system that resulted in price increases for advertisers despite declining ratings, and said his company plans to continue to have more direct engagement with broadcasters where possible.

“We can plan and build a plan based on the needs of the business for the year rather than trying to decide all at once what we’re going to do”, to give the business more flexibility, a he declared.

The eMarketer study cited figures from iSpot.TV, according to which nearly two-thirds of advertisers surveyed said their initial commitments would be more flexible this year.

“It took a disaster like the pandemic to make them do it,” Nail explained. He previously said there had been few signs of change in the area of ​​initial commitments, but TV companies had no choice but to adapt last year.

“This year it feels like they’re at least ready to meet the advertisers halfway and not give them the extreme flexibility they gave last year, but definitely give them more. flexibility that they would not have had without this experience last year, ”he said.

While the beginnings may change, they’re likely not going anywhere anytime soon. As long as video inventory is controlled by major media players, advertisers still have the same incentives to buy up front, like better pricing and the ability to lock in certain dates, said Eric Haggstrom, senior forecast analyst at eMarketer. at Insider Intelligence.

“Moving forward will always be very important, especially for these large advertisers who send hundreds of millions of dollars a year in video advertising,” he said.

Disclosure: Comcast owns NBCUniversal, CNBC’s parent company.

CNBC’s Michael Bloom contributed to this report.

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