Understanding your advertising options on streaming platforms
Streaming video services or subscription video-on-demand platforms (SVOD) provide consumers with flexible access to content to enjoy, or binge, at their own pace. Originally, they offered more affordable options to cable, but as the proliferation of services continues the world of streaming and on-demand has become more complicated.
Leading streaming services have changed their models over the years. Typically, these changes do not benefit consumers. Crackdowns on password sharing, removing favorite comfort shows, increasing costs and introducing ads are all too familiar now. While this challenges consumers, it also changes the landscape for brands and advertisers alike. Let’s review the current lay of the land and how we can help with your digital marketing campaigns.
Background
We previously discussed the changing landscape of entertainment due to the rise of smart televisions and streaming services, where we outlined the different types of viewing options. Here’s a quick review of terms related to streaming:
- Streaming: An umbrella term that describes content delivery to a user’s device through the internet.
- Over-the-top TV, or OTT: Offers live or on-demand video streaming services, which deliver content over the internet, bypassing the need for a cable or satellite provider. Think Netflix, Hulu or Prime Video.
- Connected TV, or CTV: Brings OTT to the screen. It refers to any television set connected to the internet that allows users to stream OTT content. Examples include Smart TVs, streaming devices like Roku, Apple and Amazon Fire Stick, and gaming consoles.
The Cost of Streaming
Video streaming revenue is estimated to rise to over $43 billion in 2024 as the average American spends three hours a day streaming. It is important for advertisers to continue to follow the trends and changes to their models to modernize campaigns.
According to Forbes, American households pay for an average of 2.9 streaming subscriptions every month, spending an average of $46. What’s more, 50% of Americans pay for a service without ads. Services have introduced various tactics to provide value despite higher costs. We’ve seen more and more services introduce premium content, ad-supported models and bundled services. For example, Hulu, Disney+ and ESPN+ can be bundled for a lower price point than subscribing individually.
The Forbes article also found that while streaming services initially provided an escape from the high costs of cable, 45% of users say they have canceled at least one subscription in the past year due to high costs. If costs continue to rise, some streaming services will feel the impact more than others. The chart below shows which services consumers would cancel if the price increased.
Profitability Over Subscriber GrowthIn 2022,
Netflix reported its first substantial subscriber loss in more than a decade. They found that an estimated 100 million households worldwide utilized another family or friend’s membership and decided to address the issue by eliminating password sharing. As a result, in 2023, Netflix saw subscriber growth accelerate again.
Many services need additional streams of revenue to prioritize profitability. At one point, Netflix differentiated itself by offering an ad-free platform. However, to boost their profitability further, Netflix also introduced an ad-supported model in 2022. They aren’t the only ones. Amazon Prime recently introduced advertisements as well, giving subscribers the option to upgrade for an additional cost for an ad-free plan.
Subscriber Retention is Key As a consumer, how often have you signed up for a service for one show and then canceled? As streaming services proliferate, it has become more complicated for users to figure out where to find their favorite sitcom, Oscar-nominated films or favorite sports game, as they are often on many different platforms. This can lead to unpredictable and frequent churn among subscribers.
Ad Exchanger reports some SVOD platforms face monthly churn rates as high as 20%-30%.
A deeper dive into subscriber behavior reveals subscriber paths beyond platform churners and loyalists. An
Adobe and Antenna partnership identified three personas behavior patterns:
- Plan manager: A user who changes a plan tier with the existing platform, either as an upgrade or downgrade
- Win back: A user who cancels and returns within 12 months
- Switcher: A user who cancels and switches to a competing service within 2 months
As the chart from Adobe and Antenna below illustrates, it's important to understand the churn behaviors as they represent a significant market opportunity.
Subscriber retention has become a priority for media companies in their battle for profitability, which is reflected in the race for the best content and partnerships. For example, in an effort to be a platform for “every member of the household” to find entertainment, Warner Bros Discovery launched “Max” that combines HBO, HGTV, Food Network, Cartoon Network, TLC and more (CNN).
In addition, The Trade Desk’s 2024 CTV Report highlights live sports as a major reason for advertisers to maintain or increase CTV spending as it transforms the space for both advertisers and consumers. Other examples cited in the Trade Desk’s report include:
- Peacock received a staggering record 23 million viewers after the first NFL playoff game to air exclusively on any streaming service.
- Netflix snagged a fan-favorite wrestling show, WWE Raw, for $5 billion.
- NBC Universal will sell the Olympic Games this summer programmatically for the first time, which will accumulate to more than 5,000 hours of live sports.
Maximizing Advertising Spend
In reality, no platform can have it all, and consumers know it. So, how can we help advertisers find the right audience and maximize their investment?
The Trade Desk’s 2024 CTV study suggests “95% of advertisers plan to maintain or increase their share of spend on programmatic CTV in 2024.” The Streaming Video or CTV marketplace is a fragmented but important place for advertisers to invest budget dollars to make an impact. In turn, advertisers gain a precisely targeted audience with the ability to leverage first-party data, control frequency, and optimize across multiple partners at once. When it comes to measurement, CTV also has the advantage of a logged-in verified user, which is important as cookies depreciate.
Hopefully, you’re now convinced that it is advantageous when advertisers don’t put all their eggs in one basket with SVOD or CTV inventory sources. We recommend building premium inventory deals with multiple partners. Change is inevitable, but our team is on top of it. Fill out and submit the form below to start a conversation on how to enhance your digital video strategy and activation.