Advertising, Connected TV

The State of Streaming in 2024: Ad Tiers are King

As a new year begins, the ad-supported streaming competition heats up. But who comes out on top may be determined by more than just advertisements.

The State of Streaming in 2024: Ad Tiers are King

6 Min Read

New year, new… ad tiers on streaming? The beginning of a new year can mean many things to people, but in advertising land, the much-talked-about topic for 2024 is advertising-based video on demand (AVOD).

Over the last few years, nearly every major streamer has launched an ad-supported tier. And with these offerings have come ups and downs in subscriber numbers, viewer satisfaction, advertiser return on investment, and more. Now with Amazon’s recent announcement of an ad tier, 2024 is sure to be a pivotal year for AVOD.

Begun, the Ad-Supported Streaming Wars Have

Rebrands, consolidations, password crackdowns… A lot happened in the world of streaming in 2023. But one of the most notable occurrences was the growth of AVOD. While this type of streaming subscription isn’t a new thing — Hulu has offered one for years — in 2023 some key players solidified their place in the ad-supported club.

Netflix’s ad-tier launch in late 2022 started off a bit rocky, but they were able to turn things around by the end of 2023. Largely crediting their crackdown on shared passwords, they gained close to nine million new subscribers in Q3 alone. And as of last week, 23 million (of their 247+ million) subscribers choose to watch ads in exchange for a lower monthly cost.

Disney+ also added an ad-supported offering at the end of 2022. Despite losing 14 million subscribers due to a strategic shift in focus away from one of their entities in India, they gained seven million subscribers in the fourth fiscal quarter of 2023. Recently, Disney+ announced that 50% of new subscribers watch the platform’s content with advertisements.

These are only two of the many streamers with ad-supported offerings — Max, Paramount+, and Peacock, among others, are in the ring as well. Who will win the ad-supported thunderdome once and for all? It’s yet to be seen. But the competition just got even more intense, as another streaming giant — Amazon — indicated that they’d be joining in on the fun this year.

Amazon is Promising Massive Ad-Supported Reach, But Can They Make Good?

All eyes are on Amazon who recently announced that an ad tier will be added to Prime Video. One benefit they’re touting straight out of the gate: impressive CPMs (cost per mille, i.e. what an advertiser pays to reach 1,000 viewers). According to ad buyers, Amazon’s CPMs, which are averaging in the mid-to-low $30 range, are “far more” competitive than Netflix’s were at launch (~$65).

These comparatively small CPMs are likely due to Amazon’s potential reach. As ad buyers told Adweek, “That more competitive pricing is largely due to Prime Video’s massive scale, with the company projecting a reach of more than 100 million subscribers at launch.”

So where are these numbers coming from? It’s in the company’s business model: unlike streaming rivals like Netflix and Disney+, who offered current subscribers lower rates for an ad-supported experience, Amazon will automatically opt current Prime Video subscribers into their ad-supported tier (and upsell them to keep the ad-free experience they had before).

With Amazon now offering ads, it’s still TBD which streaming service(s) will come out on top, but advertisements (or lack thereof) likely won’t be the only factor that leads to success on this front.

Strategic Content and Transparency Could Be What Sets Some Streamers Apart

For years the quantity of new TV shows and movies on any given streaming service was what pushed them to the top — a deep content library was a primary goal for many major streamers. Now, some platforms are shifting their strategies on this front.

Netflix is the prime example: the streaming giant released over a hundred fewer fresh shows in 2023 than the previous year.

“Right now, we’re not trying to hit a set number of film releases. It’s about ‘Let’s make what we believe in,’” Scott Stuber, chair of Netflix Films, told Variety. “And let’s actually put forth a slate that we can stand behind and say, ‘This is the best version of a romantic comedy. This is the best version of a thriller. This is the best version of a drama.’”

While this move is almost certainly a way for Netflix to spend less money on production costs, it could also be a tactic to improve viewer experiences. Assuming, that is, that higher-quality, lower-frequency content is preferable to subscribers than an influx of poorly done shows and movies.

The streaming giant has also been trying something new when it comes to transparency. Once notoriously private about sharing data, Netflix recently released viewership numbers for 99% of its catalog. The move was in part spurred by the WGA and SAG-AFTRA strikes — during which the lack of transparency in streaming viewership was a major point of contention. With the report, Netflix says they intended to address those concerns.

“The unintended consequence of not having more transparent data about our engagement was that it created an atmosphere of mistrust over time with producers and creators and the press about what was happening on Netflix,”  Co-CEO Ted Sarandos said.

A letter published by the streamer echoed these sentiments.

“This is a big step forward for Netflix and our industry,” it reads. “We believe the viewing information in this report — combined with our weekly Top 10 and Most Popular lists — will give creators and our industry deeper insights into our audiences, and what resonates with them.”

We’ll be interested to see which — if any — other major streamers get onboard the transparency train in 2024.

Advertisers Beware — Strong Performance Relies on More Than Reach

Ad-supported streaming obviously offers opportunities for brands to grow business via advertising on Connected TV (CTV). That said, as ad tiers multiply, it’s likely that more streamers will try to sell eye-popping reach stats.

Some advertisers are already skeptical — even of major services like Amazon, which is currently claiming a reach of 100+ million subscribers.

“I’ll be shocked if any advertiser achieves those numbers,” one buyer told Adweek. “Even with super large budgets, it’s a huge level to hit when you’re not the top used application in the country. And turning this feature on might push people out of using [Prime Video] as much.”

If this buyer is proven right, advertisers need not despair. Instead of prioritizing reach above all, savvy marketers focus on strategic precision audience targeting on CTV. This gets their ads not only in front of viewers watching premium networks, but the right types of consumers — consumers who are both engaged with the content they’re watching and highly likely to take action after seeing an ad that is relevant to them. Aiming for quality, not quantity, will ultimately drive more (not to mention more durable) business for advertisers of all shapes and sizes.

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