Soaring production costs, high levels of churn, and consumer preferences will likely cause more streamers to embrace advertising.
By the second half of 2023, every major streaming service — HBO Max, Disney+, and, yes, Netflix — will offer consumers a low-cost, ad-supported version of its platform, predicts Jeff Green, CEO of the largest independent ad-buying platform, The Trade Desk.
“Everyone in the U.S. streaming wars will be offering consumers that choice,” Green says in the latest installment of “In Human Terms,” a video series in which he explains digital media trends in plain English.
Green has for years predicted Netflix would one day have advertising, and those predictions moved one step closer when Netflix CEO Reed Hastings said the streaming video behemoth is considering adding a lower-priced, ad-supported subscription option.
Green’s opinion is that streaming companies embracing advertising is “inevitable.” He points to several contributing factors for the anticipated shift:
- Competition for subscribers is only increasing: It’s called the “streaming wars” for a reason. Competition has stepped up significantly in recent years, as Amazon, Apple, Disney, HBO, NBCUniversal, Paramount, and other media conglomerates have launched their own proprietary streaming services, some of them offering ad-supported tiers. There are also a number of popular ad-supported video on demand (AVOD) services, such as Tubi, Pluto TV, and Roku Channel, that have gained traction among consumers. As these platforms look to continue to grow their subscriber base, offering consumer choice maximizes their potential.
- Ads will drive subscribers: Green explains, “Some users will say, ‘I can pay half as much and get access to the same content just for seeing ads? Fantastic.’”
- Subscription fatigue: “Consumers can’t afford to pay for all these different subscriptions,” Green says. Instead, consumers may choose to pick up and drop streaming services based on the release of new films and series. It’s a wise strategy for consumers, but a challenge for streaming platforms. By providing consumers the choice to pay with ads, however, Green believes streaming platforms can address subscription fatigue.
- High production costs: The content arms race is only getting more expensive with each passing year. Streaming services are spending millions of dollars to produce and acquire original films and series. Offering an ad-supported tier will help fund this new golden age of television.
What is perhaps less well-understood, Green contends, is the positive impact consumer choice will have on advertiser flight to premium TV content. As advertisers follow consumer eyeballs to streaming platforms, they increasingly want to advertise against trusted premium content and de-emphasize user-generated content. With more premium streamers offering advertising inventory, Green believes that advertisers will accelerate their shift to CTV.
The opportunity is equally large for Netflix, which is poised to remain something of a pace car in today’s streaming landscape. “Netflix can become the gold standard by having a light ad load and a high degree of relevance,” Green says. “We’re going to create, as an industry, a better TV experience than we’ve ever had — where consumers have more choice, not just in terms of content, but also in how they pay for that content.”