It’s becoming more expensive for streaming viewers to avoid advertising. Netflix, Disney+, and others have raised subscription prices over the past several months.
Streaming services’ move toward connected TV (CTV) advertising and higher subscription costs comes at a time when linear TV ad spend and viewership has declined, explained our analyst Ross Benes during a recent Meet the Analyst Webinar.
Streaming services will continue to focus less on gaining subscribers and more on profits in 2024. To achieve this, companies will raise the fees paid by consumers and open their services up to advertising. Meanwhile, Amazon will drive the acceleration of CTV advertising in 2024 with the launch of an ad-supported tier on Prime Video.
Here are the key takeaways for marketers surrounding 2024’s video ad landscape.
1. Linear TV is on a long and winding downward road. Continual ad price increases can’t make up for declining linear TV viewership.
There are, however, significantly more ad-supported streaming viewers than there are pay TV viewers, and that gap will only widen by the end of the forecast period in 2027, Benes noted. By then, there will be about double the ad-supported streaming viewers as there will be linear TV viewers.
In the past, TV networks have recovered cord-cutting losses by raising ad prices. Yet, in 2023, primetime upfront costs per thousand (CPMs) are forecast to drop 2.7% for broadcast networks and 5.0% for cable, per Media Dynamics.
2. Seeking profitability, streaming services are raising subscription prices and getting more serious about advertising. Ad-supported streaming viewership is growing now that nearly all major US streaming services offer ad plans.
The majority of Peacock, Paramount+, and Hulu viewers watch ad-supported plans, according to our forecast. Viewers of Netflix’s ad-supported plan will be under 5% this year, but that share is expected to grow.
“Aside from raising subscription prices and getting more people to adopt cheaper ad tiers, the other way streaming services are earning more dollars so that they can achieve profitability is by cranking up the ad load,” Benes said.
Netflix has about 3 minutes of ads per hour, putting it on the low end of ad loads, Benes noted. Hulu is higher, with closer to 8 minutes of ads per hour. Ad loads, however, rarely fall backward.
3. Streaming ad price ranges are narrowing. The high ad prices Disney+ and Netflix initially asked for have lowered.
Streaming ad dollars are also spreading out. In 2019, Hulu, YouTube, and Roku accounted for over half of the US CTV ad revenues; now, they’re about one-third of the market.
Instead of just three services with billion-dollar CTV ad businesses, there are now more than a handful, Benes explained.
4. Amazon will make a big splash in streaming advertising next year. The introduction of ads into Prime Video will cement Amazon as one of the largest digital video ad sellers.
“The move will add nearly $2 billion, not just to Amazon, but to the whole CTV ad market,” Benes said.
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