US Streaming Video How Ad Supported Will Reshape the Market

The 20,000 Foot View:  In the shift to streaming, advertising has been sidelined by the growth of streaming video on demand (SVOD) in the US video market. However, Hulu’s growth, along with increasing competition for consumers’ digital wallet, is helping to make the case that there is an opportunity to replicate traditional pay-TV’s subscription and advertising model. However, the market is now prepping itself for a big push at ad-supported video on demand (AVOD), as illustrated by Viacom’s acquisition of Pluto TV, Sinclair Broadcasting Group’s launch of STIRR, Amazon’s IMDbTV rebrand with European rollout, and NBCU’s Peacock set to move in 2020. However, with streaming consumers being tech-savvy and ad-resistant, AVOD players will have to execute with a supremely high degree of sophistication to fulfil their clear potential. 

Key Insights

• The video            market is maturing: multiple digital            penetration was flat at            in            the same level as            2018
• Traditional TV            has an accountability problem:            of            TV viewers stop paying attention            TV ads come on (more            the all-consumer average)
• Meanwhile, Netflix’s            may be locked behind an            paywall but are more responsive            ads than overall consumers
• With rising            costs and softening subscriber growth,            question is how long Netflix            afford not to mine its            revenue opportunity
• With Netflix            seven points more likely than            consumers to pay attention to            sponsors, smart brand integrations may            the best first step
           of SVOD consumers do not skip relevant ads, compared to            of overall consumers 
• SVOD subscribers            also more disposed to brand            on shows            than the average           
• Streaming audiences            sophisticated and respond best to            targeting – Netflix paid subscribers            for target ad responsiveness
• NBCU’s slated            AVOD service looks well targeted,            NBCU fans having the highest            to engage with relevant ads           
• Netflix and            users are both receptive to            ads while Hulu users are            receptive 
• Disney and            fans both strongly over-index for            sponsor receptivity, indicating clear sponsorship            for Disney’s macro streaming strategy
• AVOD differentiation            increasingly be defined around linear            non-linear streaming 

Companies and brands mentioned in this report:  Amazon, Amazon Fire, Amazon Prime Video, Apple, AppleTV+, CBS, Cheddar, Comcast, Disney, Disney+, Distroscale, DistroTV, DUST, ESPN, Facebook, Google, Hulu, IMDb Freedive, IMDb TV, NBCU, NBCUniversal, Netflix, Nike, Peakcock, Pluto TV, Roku,  Saveur, Shout Factory, Sinclair Broadcasting Group, Sky, Sportskool, STIRR, TheStreet.com, Vudu, Warner Media, YouTube, YouTube TV