Content Insider #873 – New Ads
By Andy Marken – andy@markencom.com
“If it ain’t that piece of paper, there’s some other choice they’re gonna try and make for you. Let me tell you this, the older you do get the more rules they’re gonna try to get you to follow. You just gotta keep livin’ man.” – Wooderson, “Dazed and Confused,” Gramercy Pictures, 1993
Finally … streaming video is changing and will become a new, better, more dynamic, more vital entertainment medium.
Yep, mark 2024 down on your calendar as the industry’s turning point.
This is the year – just in time for elections around the globe – that the industry created:
Sure, you had a form of the bundle before, but the new bundles are less rigid on what you watch, when you watch it, where you watch it.
O.K., in fairness, we’re just getting started with the new bundles so, it will take time.
We know, you thought right after people signed up for Netflix and ran through the stuff they wanted to watch that they’d simply add another service … and another service … and another service.
Real Values – It didn’t take studio streamers long to figure out that their content was too valuable to simply “rent” to Netflix. Soon thereafter, they determined that on their streaming service it was more valuable than the other guys’ and that consumers would quickly see the value. Yeah, right!
Each guy (and yes, most services were run by guys – very well-paid guys) knew his content was as good and modestly even better than Netflix stuff which in 2021 was $15+ and had attracted more than 200M subscribers globally, 50M+ in the Americas.
Good, Better – Since Wall Street certainly didn’t understand the entertainment industry, other than it made money, they thought everyone in the race should be like Netflix … growing and profitable.
Everyone charged for their service based on the Netflix Rule.
O.K., not everyone. Amazon really didn’t care about the chump change coming from the streaming service at the time because Bezos (then CEO) was raking it in from their global ecommerce customer base of 300+M users and adding streaming was just an enticement to stay signed up for Prime.
Sure, he also liked partying with directors, producers, actors, studio heads during the awards events, but hey.
Apple, for a change, was more realistic in its monthly subscription fee but then, they also had 1.5B customers around the globe and an apps library that kept the younger crowd connected – just ask our daughter.
All of the services are good in their own way and the price for each, less than a theater ticket and popcorn, so that’s not so bad.
Except it is.
Once you’ve seen all the stuff on their service, you want to move on and watch all the great content on their service and do it again and again.
Changing Sources – Consumers liked how easy it was to sign up for and cancel streaming services–and they used it to their advantage. Once you’ve seen all you want, move on until later then maybe come back. Churn is easy and constant.
So, if you’re not watching one of the services’ contents, you might as well drop them and pick up someone with new, fresh, exciting content.
And you’ll also save money.
Hey, it’s their fault; they made it easy to sign up, easy to walk away and after years of struggling with the 200-channel, $100 plus cable ball and chain, you said never again.
We have a friend who saves a bunch of money during the year by signing up for the trial period, watching everything he’s interested in, dropping the bundle just before the trial ends and repeating the process over and over.
No commitments, no regrets.
Don’t even consider the new streaming bundles that are being constantly deviously mashed together behind corporate doors and released to make your entertainment more meaningful and save you even more money.
You know, like:
In other words, everyone has some kind of cockamamie bundle, and the pricing is “flexible.”
But the big news this spring during the Upfronts was that streamers had discovered a new and breathtaking way to lower the out-of-pocket for consumers.
Yeah, it’s called … advertising!
New Discovery – Late night host Jimmy Kimmel polked fun at his Disney bosses during this year’s upfronts, announcing they had discovered a new solution to making money, it’s called … advertising. Yes, it really works.
It’s a revolutionary way for the eight-plus salary bosses to give the consumer a little more for a little more and still make enough for their end-of-year bonuses.
Yeah, “everyone” thought it as a helluva idea … win … win … win.
Even Netflix’s Sarandos went along with the idea because Netflix wanted to stay the world’s leader and that meant expanding their subscription base beyond its current high of nearly 270M folks (and yes … they’re profitable).
Best Budget – While Netflix’s subscriber numbers steadily grew because of all of the “gotta see” films/shows, people also found projects that “interested” them; and rather than pay for all of the ad-free services, they would drop and add services. To keep them from switching, services offered an option – lower-cost subscriptions supplemented with a limited number of ads.
After all, there are 1.72B TV households and an estimated 520B plus smartphones in use around the world and like most, every kid wants to watch Lawrence of Arabia on her/his iPhone.
The truth is all of the studio, streamer bosses don’t give a rat’s behind how you watch their content as long as you subscribe … and stay subscribed.
Password sharing is gone (difficult now) and only an idiot would use a pirate site for his/her entertainment stuff because well, they gotta make money and …
The best way to make everyone happy is to put together a bunch of services, charge an attractive price and keep you coming back.
If they give you an attractive subscription fee, they need to make money the old-fashioned way … let someone show you their ads but do it in a way that isn’t too offensive.
Contrary to our more sophisticated friends, we like ads.
O.K., we don’t like:
The days of the ad hernia are still here and will be here as long as there is a vestige of linear TV.
Even Hulu has found it difficult to wean itself from the money it receives for ad placements on top of their “affordable” subscription fee–“only four – six minutes per hour” compared to 20 … awesome!
The consensus for streamers seems to be two to three minutes per hour is sufficient (translation – they’ll make enough money).
Some give you a heads up when the ads are coming with a small countdown clock as to when the show/movie will return.
Arguably, there can/should be fewer ads because the streaming service (and the advertiser) knows more about the individual or household since they are constantly collecting, crunching, analyzing and storing their viewing data.
No, we’re not complaining because the smart ones – those with deep technical roots – use that information to anticipate what you may want to watch next or what new video storyline will hook/reel you back in to keep you from bailing to another service (churn).
And … it works.
Just ask Netflix, Amazon, or Apple, they know data is a good thing and you need to keep it away from prying eyes.
Disney has been a quick study.
Others talk about how good it’s gonna be.
Still others focus on things that really matter like … rearranging deck chairs.
Targeted Approach – Streaming video allows advertisers to more efficiently and effectively reach interested or potentially interested consumers as opposed to sending ads to people who don’t want their offerings, can’t use them and can only get irritated.
That same data can be selectively used to guide marketers to the right viewers who best match their best prospective customer.
As a result, they can focus their messages on the individual/household’s wants/needs rather than carpet bombing everyone watching the show/movie as in the “good ol” days.
In addition, they can present ads to folks who might be interested and avoid those who aren’t interested or worse, are irritated by the ad, the streamer, the marketer.
Sure, the ads may cost “a little more,” but marketers know they’re not wasting opportunities or … worse.
In addition, they have pre- and post-appearance data/measurement, so they can continually improve their marketing activities/efforts.
A recent study by Double/Verify and Antenna Research indicated that the inclusion of ads in content had very little impact on their enjoyment of the movie or show.
But streaming ads have also caused issues that led to a few issues that services needed to address:
By themselves, ad breaks seemed to give viewers a breather and chance to reset, refocus their attention (yes, and take necessary breaks).
Advanced codecs (encoders/decoders) and more robust wired/wireless internet have almost made the buffering wheel unnecessary but it can still be an issue for ad-supported streaming because ads and ad slates haven’t been properly prepared/staged.
The result is buffering, latency or momentary blank screen.
Streamers need to assist marketers/advertisers in optimizing their ads – and the entire ad slate – so there is a smooth transition between content to ads and ads to content.
Another consideration marketing folks have to address is the use of ad placement services that “package” the ads and send them from their servers to/through the streaming content.
There’s always going to be latency when the ads have to travel over two networks – the placement service and streamer – to the viewer’s screen.
The importance of CDNs (content delivery networks) was explained years ago with the example of data over optical fiber requiring 100 ms to complete a round trip between LA and London.
Sending different shows/movies to 270M subscribers from a central server farm would be … impossible.
Netflix and Amazon solved the content latency issue years ago by placing video servers in strategic locations around the globe.
Netflix has over 20K video servers strategically located around the planet to stage shows/movies closer to the end user.
It has been an issue that the tech-based streamers say, “everyone knows that!” but most of the network tech folks overlooked it.
Disney – which is certainly no technology slacker – rolled out Disney+ in April 2019, but it’s servers immediately crashed because of improper CDN design.
Yes, they learned quickly.
Best Ad Slot – Today, a one-hour streaming show runs a full hour rather than 40 minutes and the rest of the time is reserved for ads. Rather than simply drop ads into shows and interrupting important scenes, AI can help pinpoint where they can be added so they are “acceptable.”
Everyone remembers back when anytime, anywhere, any screen streaming movies/shows first entered the scene by paying a modest subscription.
Well, fees went up as everyone, but Netflix and Amazon were bleeding red ink, so it was inevitable … turn to ad support and lower subscription fees.
A big difference was that showrunners had gotten used to the idea of making an hour TV show or two-hour movie a full hour or two.
So, the storylines were crafted to flow uninterrupted from beginning to end. That meant ad slates had to be “squeezed in” wherever possible and usually it was always at the wrong time.
AI is increasingly being used to search for “natural ad breaks” so they are less disruptive to the viewer.
Despite all of these adjustments in home entertainment, the one thing we all know is that Netflix changed all of the rules by going direct to the consumer and there’s no going back.
The industry is learning how to navigate a totally new and decidedly different industry.
Forced take it or leave it bundles are gone.
Forced 20 minutes of ads … gone
Watch on their schedule … gone.
It has been good, bad and a learning experience for everyone – studio/streamer, content creator/producer, marketer/advertiser, consumer.
It has forced coopetitors (cooperative competitors) to work together and against each other.
Bundles are still a work in progress but viewing data becomes more private.
Netflix’s latest viewership report noted that folks watched their content 90B hours of 6,599 series seasons and 9,395 films in the last half of 2023.
We did our share, but differently.
The minute folks started offering a less expensive service with “a few ads” per hour people switched services.
We switched all of our services – except our daughter’s Apple TV+ which doesn’t offer an ad-supported version … yet.
The bundles the other folks – AT&T, Verizon, Xfinity, Spectrum – are “interesting” but gawd, why go back to “the good ol days?”
You’re always going to get someone in the mix you’re really not interested in supporting and are paying for stuff you don’t really want.
Been there … done that … don’t want to do it again.
In addition, all those delivery services just negotiated a deal that would keep you on their service.
There’s no program guide on who has what and when so you still have to do your own search.
Like a lot of folks, we developed our own bundle – three AVOD and two FAST (free ad supported) – of services and added a free streaming service guide (check ReelGood and JustWatch).
2 – 3 – Whether they are ad supported or not, most people simply subscribe to a few streaming services, limiting the number of shows/movies they have to choose from and changing services when they feel they’ve seen everything there they want to see.
Personally, we feel three is probably the maximum services we’re willing to pay for because more than that and your options become … confusing.
With tens of thousands of shows and movies from almost every creative corner of the globe, it almost feels as though the lineup will ever end.
Decide to go to another delivery service … nothing lost in the move.
It turns out that paying a lower monthly subscription fee is popular … everywhere
Economic Choices – If asked, almost everyone will tell you they don’t like ads until someone offers you a discount for your streaming entertainment in exchange for adding in a few ads (even if you leave the room). Most will opt for the lower-cost ad-supported version.
Don’t get us wrong.
There will always be people who simply don’t want ads intruding on their home entertainment and they’re willing to pay more for that opportunity.
The same is true of appointment TV.
There are people who want their news at 7 or 8 p.m. followed by a few hours of a movie or shows followed by the evening comedians.
That’s not going to change; but according to a recent report by Parks Associates, 50 percent of the folks who stream their entertainment watch a free, ad-supported service at least once a week.
Most video viewing is still done on the home TV, according to Parks analyst Sarah Lee; but they also want to manage their entertainment budget as wisely as possible.
A balanced subscription of SVOD, AVOD and FAST services ensures there’s something always available that they want to watch, and that the combined monthly entertainment bundle expense is reasonable.
However, when your old cable pay TV bundle was $100+ a month … that’s a pretty high bar!
Makes you want to recall what Pink said in Dazed and Confused, “All I’m saying is that if I ever start referring to these as the best years of my life – remind me to kill myself.”
Today’s streaming home/personal entertainment options are better than “the good ol days” and the content volume and quality will continue to get better.
We can only agree with Woody Harelson’s Wooderson … All right, all right, all right.
Andy Marken – andy@markencom.com – is an author of more than 800 articles on management, marketing, communications, industry trends in media & entertainment, consumer electronics, software, and applications. An internationally recognized marketing/communications consultant with a broad range of technical and industry expertise especially in storage, storage management and film/video production fields; he has an extended range of relationships with business, industry trade press, online media, and industry analysts/consultants.
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