So Long, Agencies: Why Brands Are Shifting CTV Advertising In-House
by Stephen Graveman
3 Min Read
Disney’s dedication to their streaming service shows media companies are following viewers
When Disney reported company earnings last Thursday, they revealed a steep 82% drop in quarterly operating income due to coronavirus-related impacts on their theme parks and movie business.
So why did their stock jump 4% the next day? Because their streaming TV business is booming.
Disney+ gained 73.7 million viewers in its first year of operation. It took just 11 months to achieve what Disney originally planned to take five years. And the streaming gains weren’t just limited to their flagship service either; Disney-owned Hulu saw subscriptions grow 27% year over year, while sports streaming service ESPN+ tripled their subscriber counts from 2019.
“The real bright spot amidst the pandemic has been our direct-to-consumer business,” said Disney CEO Bob Chapek during a conference call with investors. “One year ago today, we launched Disney+ and it has quickly exceeded our highest expectations…We’re going to put a lot of wind in the sails for our Disney+ business.”
When one of the world’s largest media companies pledges its commitment to Connected TV, you know it’s big business. And it’s not just Disney, either. Media giants that have dominated linear TV for years are now pivoting toward Connected TV: HBO Max, NBCUniversal’s Peacock, and CBS All Access are just a few streaming services to launch in the past year.
That’s because they’re following the viewers.
Content producers are shifting to Connected TV because it’s where viewers are increasingly spending their time. And despite its already impressive usage stats, we’re just in the early stages of that transition.
This begs the question: so much content on linear television is supported by advertising dollars—will that be the same on Connected TV? Streaming is famous for its subscription models (Disney+ and Netflix being key among those). Advertisers need not worry, however. Connected TV’s ad business is booming just as much as its viewership.
While Netflix and Disney+ may be industry heavyweights, they’re just the tip of the Connected TV iceberg. The ad-supported model for streaming TV networks and apps is flourishing, and that’s because viewers are gravitating toward cheaper, ad-infused alternatives to offset cost.
These viewership trends make sense. As viewers adapt to a streaming-first world, they’re busy building out their roster of streaming subscriptions. Cost comes into this equation; if a consumer is willing to foot the bill for Netflix and Disney+, they’ll look to trim costs elsewhere while still seeking out additional content. That means either free ad-supported options, or hybrid models like Hulu, CBS All Access, and Peacock which offer cheaper ad-supported plans.
It’s this behavior that makes ad-supported options such a smart move for major media networks. Ads on streaming can be big business, one that more advertisers are growing keen on to reach their audience. Its ability to target specific audiences (vs. linear TV’s loose targeting approach) and record measurable performance metrics has drawn more and more ad budgets.
As ad dollars pour into the channel, publishers will look to create more inventory and room for that spend to stretch. Case in point, HBO MAX is planning on launching an ad-supported tier in Q2 of 2021. This is a major development as HBO’s DNA is strictly ad-free (they were doing it before it was cool back in the early days of cable).
If HBO is diving into the ad business, you know there’s something to it. And as major networks seek to maximize the opportunity Connected TV affords, ad inventory and reach will only expand as they look to top out revenue.
It will be interesting to monitor how these trends evolve as Connected TV becomes more entrenched in people’s media consumption. We’ve reached a tipping point where media companies need to have a streaming presence. We’re on the cusp of a moment where advertisers will need to do the same—and it’ll be here sooner than you think.
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