Ads May Be the Future of Streaming. They Also Might Ruin the Whole Damn Thing

Chris Lindahl
·3 min read

At the June 1 National Association of Television Program Executives conference in Hollywood, a university professor asked what the TV executives would not. During a panel he moderated that promised to look “under the hood” of streaming, Jeffrey Cole, founder and director of the USC Annenberg School’s Center for the Digital Future, posed the question that has the power to reshape the golden age of television: “How do [streamers] work in this advertiser ecosystem where advertisers are afraid of offending and streaming content frequently offends?”

We all remember the joy of those initial ad-free Netflix experiences. Part of it came from watching shows that no longer contorted their beats to match commercial breaks; more essentially, the scripts didn’t self censor in fear of what advertisers might think — because there were no advertisers. Now, streamers have declared ad dollars essential to their platforms’ long-term health.

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Unlike broadcast, you don’t have to watch ads on a streamer; an advertising-supported service or tier is only one (lower-cost) option. However, while programming is (technologically) platform agnostic, the platforms’ would-be advertisers are not. Vikrant Mathur, co-founder of Future Today, which curates and connects advertisers to AVOD channels, told the audience at the Behind the Scenes panel that some clients ask for their streaming ads to run only on movies rated G or PG — but all advertisers are demanding more data about the “context” of the programming.

“You have a real diminution of audience and the inability to target on linear media,”  you have a huge and growing audience on FAST, on AVOD, and the dual supported services,” said Candle Media principal Kevin Mayer, whose recent acquisitions include Reese Witherspoon’s Hello Sunshine, Moonbug, and ATTN, among others. “So there’s a huge flight of advertising to [streaming] because advertisers that still want very high-quality premium video inserted in an ad, but to be targeted. I think you’ll see a lot of energy behind that model. It makes a lot of sense.”

Advertisers and audiences agree, and are already voting with their feet (especially if you keep cash in your sock). Less than half of U.S. households will pay for linear TV next year, a decline of 10 points from 2020, according to Insider Intelligence. Meanwhile, domestic ad spending on video is projected to be $76.20 billion, $8 billion more than will be spent on TV ads.

The great media buyer migration to streaming will only ramp up when Netflix and Disney+ launch their own cheaper, ad-supported tiers. By then, Amazon Prime Video and Apple TV+ will be the only major streaming services without an ad-supported option, although Amazon has its FAST/AVOD service Freevee.

Back in the day — that is, at the start of this year — SVOD platforms had one boss: the user. That’s no longer the case and may never be again. However, no one in the NATPE conference rooms at the W Hollywood Hotel was willing to discuss how that might impact the content itself. Eight decades of broadcast history suggests that will be the case. So does the observer effect, the psychological phenomenon in which people change their behavior because they are aware of an observer’s presence. The advertisers are here, and they’re watching.

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