Why ad-funded models are back, and how to make the most of them
As streaming services have gone mainstream over the last few years, consumers have no shortage of options for their entertainment. But as our Streaming’s Next Act report highlighted, an ever-expanding menu does not necessarily mean ever-happier customers. Instead, in an ironic return to the frustration that prompted cord-cutting and the initial adoption of streaming, our report identified consumers’ growing dissatisfaction with “Inefficient Bundles.”
In fact, with the rapid proliferation of platforms to choose from, some consumers are starting to question just how many services they are willing to pay for. Our research revealed that 63% of consumers agree that it’s too expensive to pay for all the entertainment subscriptions they want.
of consumers agree that it’s too expensive to pay for all the entertainment subscriptions they want.
As consumers begin to rationalize their spending on streaming subscriptions, there will of course be winners and losers. One of those winners could well be ad-funded video. This fast-growing category includes both on demand (AVOD) such as Fox’s Tubi and Disney’s Hulu in the United States and All4 and ITV Hub across Europe, as well as the linear, free, ad-supported television (FAST) services such as Viacom’s Pluto TV and Xumo in the United States, and Joyn and Discovery in Europe.
In the wake of the pandemic and in the face of rising inflation, consumer subscription fatigue may make ad-funded models more attractive as a means to counter Subscription Video-On-Demand’s (SVOD) slowing subscriber growth. The growth of ad-funded streaming offers opportunities to all players in the media value chain. That’s the good news.
The big challenge? Getting AVOD/FAST right is not easy. It requires high levels of engagement to secure advertising dollars and achieving that will require a range of approaches and capabilities that are distinct from those needed for successful subscription-based services.
AVOD/FAST challenges: new game, new rules
To succeed with AVOD and FAST means taking a new approach that’s different to what works for SVOD services. What that approach looks like will vary according to where a player currently is in the media and content value chain. However, ad-funded models raise some challenges for all players.
What’s your role in a re-aggregated world?
As the rise of ad-funded video creates a major shift, players must think about where they can productively locate themselves in this new geography.
What’s your value to advertising agencies?
SVOD-only models leave a lot of money on the table so platforms will need to persuade advertisers of the advantages of this new spending opportunity.
How will you keep consumers engaged?
Platforms need to understand how to attract viewers to the platform and keep their attention, so they return again and again.
Going beyond video
For decades, media companies have sought a direct connection to consumers, and with streaming services, finally have it. As the cold war of content spending and subscriber churn has shown, streaming will be a hard-fought business. Adding ad-funding business models is only the first innovation away from SVOD. In fact, the options beyond video (like commerce, sports betting and social viewing) are compelling, offer expanded, potentially improved economics, and new ways to delight fans with incredible storytelling and experiences.
This is only the beginning of the innovation that will harness the potential of a very direct relationship with consumers. It’s time for companies to take the next step and knock on the “front door” of their consumers. The companies that do will reap the rewards.
About the research
Accenture conducted research to gain an understanding of global consumers’ preferences, beliefs and behaviors on their video content streaming experiences. The online survey of 6,000 consumers age 18+ in 11 countries was designed to identify significant changes to the existing D2C media regime and offer suggestions for brands across the media spectrum to adapt their model to be more relevant and successful with customers. Fieldwork was conducted between October and November 2021.