STREAMERS
THE RISE OF AVOD
THE RISE OF AVOD: WILL AD FUNDED STREAMING BE THE NEXT TOP MODEL?
AS CONSUMERS TIGHTEN THEIR BELTS, AD FUNDED MODELS ARE BECOMING A MORE ENTICING PROSPECT FOR STREAMERS. MEG CARTER REPORTS
how attractive and profitable the streaming model can be. But suggestions of a streaming crash are premature. Rather, video streaming is growing up. And as it evolves, its shape and model are changing. For years, subscription VOD (SVOD) services
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have dominated. Now, with the likes of HBO Max, Peacock and Disney-owned Hulu allowing subscribers to pay less or sometimes nothing to access select programming in return for watching ads – and even Netflix finally considering an ad-funded tier – ad-funded VOD (AVOD) and free ad-supported streaming TV (FAST) services are on the rise. For proof look no further
than this summer’s launch of ITVX, the UK’s first integrated AVOD/SVOD platform, and the arrival of Paramount Plus, a premium subscription platform launched by Paramount last year to compete with Netflix and Amazon Prime Video and run alongside its ad- supported free streaming service Pluto TV. Meanwhile, following a deal struck with You
Netflix’s announcement in April that it has hit an apparent subscriber wall sent out shockwaves, prompting many to question
regions including the US and Europe, 63% of consumers agree it’s too expensive to pay for all the entertainment subscriptions they want. Less time at home post COVID-19 lockdowns
combined with the cost-of-living crisis appear to have triggered subscription fatigue, one argument goes. And in the UK, some evidence does suggest this is so. In Q1 2022, 1.51 million SVOD services were
“IN DEVELOPED MARKETS, IT’S CLEAR NETFLIX HAS REACHED, OR IS CLOSE TO REACHING, PEAK
PENETRATION – THE VAST MAJORITY OF THOSE WHO WANT TO GET NETFLIX ALREADY HAVE IT”
cancelled by British households with more than half a million cancellations attributed to ‘money saving’, according to recent figures from Kantar. Just 3% of UK households signed up to a new video streaming subscription that quarter, down from 4.2% year-on- year. Meanwhile, 58% of households – 16.9 million – had at least one paid subscription, down 215,000 households quarter-on- quarter. Yet, according to
Dominic Sunnebo, Kantar Worldpanel Division’s Global Insight Director, the trend is far from black and white. “In developed markets like the US or UK, it’s clear Netflix has reached, or is close to reaching, peak
Tube in early May, Channel 4 will sell its own advertising around 1,000 hours of full Channel 4 and E4 programming on the social platform by the end of this year. Many have speculated on the current shifts in the
VOD streaming market. News from Netflix’s that it had not only lost
200,000 subscribers globally in Q1 2022 – its first fall in subscribers in a decade – but now expects to lose a further two million in Q2, was seen by some as signalling an about-turn in SVOD’s fortunes. According to an Accenture survey across five
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televisual.com Summer 2022
penetration – the vast majority of those who want to get Netflix already have it,” he explains. “(But) it’s not necessarily right to compare Netflix
with other, more recently launched SVOD platforms, like Disney or, Discovery+. For almost all other players in the SVOD space there remains significant headroom for growth – in subscriber numbers and, also, in increased revenue per user.” So, what about the rise and rise of AVOD? Some 71% of people in six European countries,
including the UK, now use AVOD platforms at least once a week and 31% using them daily, according to a study by FreeWheel, a provider of video advertising software owned by Comcast.
Further, just 29% of UK CTV households are
willing to pay a premium for ad-free content, suggesting significant scope for AVOD’s growth. In fact, global spend on AVOD series and movies is now predicted to reach US$70 billion in 2027 – up from US$33 billion in 2021, according to a Digital TV Research report out in May. Without doubt, one of AVOD’s major appeals is
cost – or, rather, the fact that as it’s ad-supported it’s subscription-free. Some 74% of UK CTV respondents in the FreeWheel research state that free access is AVOD’s main appeal. Another important factor, however, is people’s
hunger for variety – 38% in the same survey consider the wide variety of content on AVOD available to be the determinant factor. So when it comes to which VOD model now looks set to fare best, it’s not as simple as either or. Dan Fahy, Paramount’s Senior Vice President for
Streaming UK, highlights structural change driven mainly by three big shifts. First, the steady move away from linear TV – an estimated seven million UK homes are now ‘SVOD-first’ and a further three
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