• How the Move to Ad-Supported Models Will Affect the Streaming Landscape

    It’s only been a few years since former Netflix CEO Reed Hastings said the platform would never have ads. Then, in November 2022, Netflix officially launched its first ad-supported streaming tier: “Standard With Ads.” By the end of Q1 2023, there were over 5 million subscribers to the plan

    This new ad-supported streaming tier represents a trend, not just for Netflix, but for the entire streaming industry. More ads won’t just have a lasting impact on both the companies and their customers — it also opens a significant opportunity for brands to reach these audiences.

    The State of Ad-Supported Streaming

    In the early days of the streaming wars, ad-free viewing was like a status symbol for these services. Now, price-conscious consumers are taking advantage of the saturated market by opting into subscriptions that are free or low-cost, which is driving major growth for companies that pair streaming with advertising. 

    Platforms like Pluto TV, Freevee, Tubi, and the Roku Channel all boast millions of value-conscious viewers. In fact, a report by Samba TV estimates that one-in-three U.S. streamers are subscribed to free, ad-supported streaming services. As major studios try to find new ways to monetize their content libraries, they’re licensing more and more high-quality titles to these low-cost alternative platforms.  

    Major studios today have begun trying to cash in on ad revenue. Over the summer, most of the major streamers, including Disney+, Paramount+, and Peacock altered their pricing to drive more consumers to their ad-supported streaming tiers. As a result, as much as 40% of new subscribers for Disney+ were joining the ad tier. 

    Photograph of woman holding phone streaming the Mandalorian on Disney+

    Why Ad-Supported Streaming?

    This conscious pivot to ad-supported streaming is a long-term strategy to ensure these services remain profitable. Allowing commercials to play during streams can help:

    • Improve margins. Even though consumers are paying less in monthly subscription fees, streaming platforms can substantially offset the shortfall through higher advertising exposure. In fact, if streamers secure incredibly popular content, they could generate more revenue than they would from a flat subscription rate.
    • Reach a larger customer base. Some consumers are unwilling to pay full price for a streaming subscription, prioritizing savings over convenience. This has already proven lucrative for Disney+, which doubled its ad-tier subscriber base to 10 million between May and August 2023
    • Open additional revenue streams. Though most streamers keep their data secret, they have unprecedented insight into the viewing habits of their customers, including their demographics, viewing preferences, and even down-to-the-minute time spent viewing each piece of content. Streamers will be able to collect similar information about customers’ engagement with ads, allowing them to sell the insight to third parties, offer consulting services on ad design, or sell ad space at a premium.
    • Cross-promote. In addition to selling ad space to third parties, streamers with ad-supported tiers can also use the space to promote their other content to subscribers for free. This can drive viewership of other content on the platform, helping retain membership while also generating additional ad revenue from future views.
    • Create more content monetization opportunities. In addition to generating immediate revenue, new revenue streams from ads open the door to more creative monetization opportunities down the road, such as digital rentals, in-show product placements, and more. 

    Start Streaming Your Ads With Help From Power Marketing

    Ad-supported streaming isn’t just an opportunity for streaming services — it’s an exciting way for brands to reach customers. Streaming ads have many of the same capabilities as ads on YouTube and other video platforms, allowing for more precise targeting. However, this streaming also pairs ads with more prestigious content — not that there’s anything wrong with cat videos. 

    Of course, ads on streaming platforms require a certain level of strategic expertise. The team at Power Marketing has extensive experience with streaming audio and OTT campaigns, as well as relationships with some of the most recognizable streamers in the industry. Get in touch to learn more about how we can help.