Ad Tech Providers Respond to Consumer Malcontent with the State of Streaming

Industry experts weigh in on consumer concerns about CTV: Is SVOD dead? Is Peak TV ending? How do you explain to consumers that they need ads to help with content generation? With CTV in an era of transition, how do we make all sides of the streaming economy happy? 

Last week, AdMonsters reported the consumers’ perceptions and bones of content about the CTV experience. The consumers we interviewed cited many issues of concern, including seeing ads when they pay for subscriptions and the need to subscribe to multiple services in order to see the full breadth of content they want to access.

This week, we asked multiple people who are providing advertising support to streaming providers about CTV advertising to respond to their concerns. Our interviews include:

  • Jeremy Haft, Chief Revenue Officer, Digital Remedy
  • Hunter Terry, Head of CTV, Lotame
  • Anthony Gonsalves, SVP, Global Business Development, Connatix
  • Jo Kinsella, Global President, XR

Susie Stulz: Consumer Concern: Peak TV is ending, so why should I pay for all these subscriptions?

Certainly, the pundits make this claim, noting the declining number of shows ordered by the studios. Is Peak TV really over?

Hunter Terry: There is more content than anyone can consume in a lifetime, even if you concentrate on a single genre. The cost of producing content is going up. And we’re seeing a trend towards licensing content to build content libraries.

Last year, Netflix told its shareholders that its recent success came from licensing content from other channels, such as “Friends” and “The Office.” Amazon has a similar strategy, as the 2021 acquisition of MGM illustrates. Amazon now has the largest library in the world, so there’s no shortage of content.

Anthony Gonsalves: The slowdown of original content is a combination of the strike, some big misses on expensive originals that fell flat, and the success of reintroducing new audiences to older shows like Suits. A lot of success comes from the USA Network Blue Sky era; a Monk movie is in the works. Networks can leverage this IP at a fraction of the costs of original content that also feels new. 

That said, there continue to be hits like Stranger Things, The Boys, Reacher, etc from the major platforms. Shudder, a horror-focused platform has found continued success with its original movies scoring multiple appearances in Rotten Tomatoes’ year-end best lists. 

Streaming providers are learning the balance between being a content producer and a distributor. Being more mindful of where to bet on original content is a part of the market maturing more than a cause for panic. 

Jo Kinella: There’s a steep cost to differentiate your platform in a saturated market to attract subscribers. Now that the entertainment industry strike is behind us, streaming platforms are full-steam ahead in producing high-quality and original content to gain eyeballs – and market share.  

SS: Consumers say that if they pay for a subscription, they shouldn’t see ads. 

When Amazon informed its subscriber base that they’d need to pay an additional $2.99 a month for the same ad-free experience, was that a signal that the era of SVOD TV has ended? Many consumers feel streaming platforms have rescinded a promise of a certain CTV experience.

Anthony Gonsalves: This is certainly not the end of SVOD; there is and will be a healthy percentage of consumers willing to pay a premium for an ad-free experience. What we have seen over the past few years is that subscription fatigue is a real thing. As costs get closer to traditional cable packages, cord-cutters are scaling back or moving to a rolling churn behavior based on content. For example, they only get a service that provides them college and professional football in Q4 and then cancel the service in February. Sorry to my provider. I’m putting in my cancellation soon on that front. The same goes for personal must-see series.

Jeremy Haft: The industry always benefits from transparency and explaining to customers exactly what they pay for and what benefit they derive from the services. 

I’ve been in the ad tech space for a long time, and we’re not like other consumers. We forget that people outside of the industry don’t understand how or why they get access to a lot of content for free or for steep discounts. It’s acceptable for a CTV streaming company to inform consumers that while they aim to offer an ad-free experience, they may introduce a low-cost option with partial ads. In today’s market, securing and producing content has become increasingly expensive and challenging. The cost of living, the cost of doing business, everything is going up, and platforms must offset those costs in some capacity. Without advertising, the price or paywall to content would be significantly higher for the consumer.

Hunter Terry: As a consumer, I want access to everything, all streaming, broadcast, and cable services, for free or for as little money as possible. But consumers understand they must meet providers in the middle. I understand the frustration of paying for a subscription and seeing ads, but that’s not different from your typical cable TV experience. Consumers sign up for several channels, and there is a commercial break every 10 to 15 minutes.

The challenge is that most consumers entered TV by subscribing to the early pioneers of CTV, like Netflix, which offered an SVOD model. But it’s unrealistic to assume that all streaming TV can be ad-free. And CTV offers premium CPMs, in the $20 range. Netflix charges $40 to $50 CPMs, and Amazon charges around $30. Advertising is just an attractive way for streaming companies to monetize their content.

Jo Kinsella: Amazon was the last of the 500-pound SVOD providers to shift to an ad-supported offering, and this model may be our new reality, especially as this line of revenue helps fund content production. So, this hybrid offering will be long-term, not the death knell for SVOD. But there is a balance to strike to help minimize the risk of churn by turning on the advertising hose full blast. 

SS: Consumers are sick of subscription costs that keep going up and up.

The ever-increasing costs of subscriptions prompt consumers to cancel services (except Amazon Prime, which feels like a freebie as most people use Prime for free delivery of consumer goods). Advertising in paid subscriptions feels like adding insult to injury.

Anthony Gonsalves: Regarding the cost to the consumer, these platforms have market caps in the hundreds of billions. They are performing highly detailed modeling to understand the trade-offs of even a $1 increase in monthly subscriptions vs potential ad revenue. I don’t think anyone takes those decisions lightly. I believe all providers will have both tiers. It makes true churn less if you can both downgrade and upgrade with ease during your peak usage periods, and a huge audience is comfortable with the value exchange of free TV and ad breaks. 

Hunter Terry: Short-term subscriptions are a trend, especially among younger consumers. I’ve done that myself. I was never an Apple TV subscriber, but I kept hearing about “Ted Lasso,” and wanted to check it out. Many streamers release all the episodes simultaneously, so it’s conducive to binging. That’s beginning to change to weekly cycles, so if you don’t want to wait until the end of the season, you’ll need to keep the subscription for several months. To keep those subscribers, they need more content. This is where personalized recommendation engines play such critical roles.

SS: To save costs, many consumers buy a subscription to a streaming service, binge-watch an entire season, and then cancel. What can streaming companies do to stem that trend?

Jeremy Haft: This goes back to the recommendation engine. Keeping viewers engaged in this environment requires that streaming companies get good at recommending additional content. What information is that recommendation based on? Current behavior, search history?

The opportunity for streaming services is to ask how they can leverage the data they’re sitting on to make smarter content recommendations for the individual consumer. Amazon sits on one of the largest datasets. A powerful differentiator for Amazon is building an infrastructure that uses its disparate assets to understand consumer engagement across its owned entities and recommend content. Still, I would be surprised if they used a subscriber’s purchasing or Twitch data (for example) for their content recommendation engine.

SS: Consumers resent paying for multiple streaming platforms to access the content they want. Is consolidation likely?

Jo Kinsella: We’ve already seen consolidation of streaming services such as HBO and Discovery, and the M&A merry-go-round between Warner Bros. Discovery and Paramount Global is still circling, so the implications for greater value in streaming services could be on the horizon and opening up greater competition between streaming platforms. 

Jeremy Haft: That issue exploded on January 13th when the Miami Dolphins played the Kansas City Chiefs. It was a critical playoff game, but it only aired on Peacock, so if you didn’t have a subscription, you were out of luck or had to pay for another streaming service.

One way that is being addressed is with bundling. In December, Verizon announced it would begin offering a bundled package with the ad-supported versions of Netflix and Warner Bros Discovery’s Max streaming services for about $10 a month. This type of approach will offer some efficiency for the consumer, and I suspect we’ll see a lot more of it going forward.

It’s better to have the consumer half the time than not having that consumer. This will lead to more “frenemy” partnerships to accomplish this. The truth is, eyeballs are getting stretched thin. CTV is decentralized, which will force publishers to find new revenue streams, which speaks to these bundles and the AVOD model.

SS: Consumers are complaining about the introduction of ads in CTV, yet those ads deliver better results. What does that tell you about the ad experience?

Jeremy Haft: The industry is focused on campaign performance, which can serve as a proxy for the value the consumer has derived from the ad experience.

When we talk about driving an outcome and tying what historically was an upper-funnel media channel to more outcome-based media, it comes down to effective tactics, like targeting the right consumer who is actively consuming TV. Get that wrong, and they will walk away; get it right, and they’ll convert. So, it’s all about creating a more customized experience for the individual consumer based on attributes, such as the consumer’s search behavior, past purchase behavior, current content they’re consuming, and so on.

Jo Kinsella: We can expect to see increased ad targeting and personalization innovations. Advertisers are increasingly looking to connect to consumers and be relevant. To do so, brands must measure up against their DE&I goals and project today’s culture through their ads to dovetail the mosaic of today’s audience. So, in that respect, creative will be the new KPI.

Anthony Gonsalves: I am excited to see the innovation in non-subscriber revenue opportunities within CTV, whether dynamic product placement or brand-new ad products that move us forward from our traditional linear experience.