Remember when one of the perks of a subscription-based streaming platform was the promise of no commercials? That didn’t last long.
At this point, it would be easier to identify the streaming platforms that don’t have an ad-supported option. Last Friday, Disney+ said it will launch a cheaper, ad-supported option later this year. On Tuesday, Variety reported HBO Max’s plans to program a 90-second advertising block ahead of a rotating batch of movies. Hulu’s always offered commercial interruptions in exchange for a cheaper subscription price; Paramount+ instituted the AVOD option last June.
“[Disney] basically said the same thing we say, which is you can serve consumers that you wouldn’t otherwise serve because you can have a lower price point and you can monetize the ad revenue,” said Paramount chief Bob Bakish during his keynote panel at Morgan Stanley’s Tech, Media & Telecom conference March 8. “They’re 100 percent right. And I’m not surprised they did that at all.”
Even streaming king Netflix won’t rule out a walk down the ad-supported path.
“For us, it’s not like we have religion against advertising, to be clear,” said Netflix CFO Spencer Neumann at the Morgan Stanley TMT conference Tuesday. “We’re focused on optimizing for long-term revenue, big profit pools, and we want to do it in a way that is great experience for our members, so we lean into consumer experience, consumer choice, and what’s great for our creators, the storytellers.”
The reason Netflix competitors are leaning into ads is they believe it will be great for their subscription rolls. Bakish predicts 100 million paid subscribers (and $9 billion in annual revenue) between Paramount+ and Showtime OTT by 2024. Disney targets 230 million-260 million Disney+ subscribers by 2024; according to an SEC filing, Disney+ had nearly 130 million global subscribers at the end of 2021.
Less-expensive, commercial-subsidized subscriptions look like a simple way to ensure those subscriber numbers have every chance to escalate. And each streamer is convinced that the option is a win for everyone.
“Expanding access to Disney+ to a broader audience at a lower price point is a win for everyone – consumers, advertisers, and our storytellers,” Kareem Daniel, chairman of Disney Media and Entertainment Distribution, said as part of the March 4 announcement. “More consumers will be able to access our amazing content. Advertisers will be able to reach a wider audience, and our storytellers will be able to share their incredible work with more fans and families.”
Ryan Gould, WarnerMedia’s head of digital ad sales and client partnerships told IndieWire that advertising can be part of “a premium experience.”
“Our research tells us that 65 percent of consumers think more favorably of a brand when they provide less commercial interruptions during programming,” he said. “Our new Brand Block InFront offering rewards consumers with no interruptions, so they can watch the film in its entirety as its meant to be enjoyed.”
HBO Max launched its ad-supported option in June 2021 with the rule that no hour would feature more than four minutes of commercials. At $9.99 per month, it is $5 cheaper than the ad-free $14.99 version. TV commercials on an HBO-branded platform sounds weird, especially paired with movies, but WarnerMedia now says 40 percent of HBO Max’s daily signups are on its ad-supported tier.
All of this is starting to make the ad-supported streamer space look a lot like that of their full-price counterparts: overcrowded. Netflix said it’s in no rush to join the fray.
“If at some point we determine something we have the right to kind of play our want into the space that meets those dimensions, then great,” said Neumann. “But that’s not something within our plans right now.”
He added: “Never say never… Other folks are learning from it so it’s hard for us to ignore that others are doing it, but for now it doesn’t make sense for us.”
Additional reporting by Chris Lindahl.