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What Netflix and Disney+ Can Learn From Free Ad-Supported Television

Cheddar News
Cheddar News
 25 days ago

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While questions are swirling around whether or not customers will subscribe to upcoming ad-supported versions of Netflix and Disney+, many services have already proven viewers are willing to watch advertising on streaming content.

"Advertising is nothing new," said Sang Kim, the senior vice president of Samsung Electronics America. "It's been around for a very long time since TV was around, right? And I think for the advertising, the technology for streaming is actually making advertising more interesting."

Since 2015, Samsung TV Plus has been offering free ad-supported television — known as FAST — to its device owners and on the web. The company recently relaunched the product to include more than 220 channels in the U.S., and a total of 1,600 channels in 24 different countries. Viewership continues to grow, with the company observing 100 percent growth in viewership over the past 12 months. Customers watched 3 billion hours globally.

"We're at — distributed — over 465 million devices worldwide," he said. "So I think the FAST is here, and it hasn't reached a critical mass. I think there's a lot more headroom, but I think it's here to stay."

Advertisers are also taking note. According to Insider, about $20 billion was spent annually on streaming advertising.

"Just a few years ago, if you looked at ad-supported streaming compared to linear television streaming, ad-supported streaming was only about a 10th of TV," Ross Benes, Insider senior analyst, said, "And by next year or the year after, it will be about half."

Streaming advertising also offers new opportunities that may not be available on traditional TV commercials, says AMC Networks SVP advanced advertising & digital partnerships Evan Adlman.

"FAST or CTV as a whole — the ability to advertise on a connected device — gives the advertiser and the programmer access to anonymized viewership data that they haven't had in the past," he explained.

In the past, brands had to buy a daypart — the name for a block of hours during the day — or a certain demographic, like adults 18 to 49 years old. Streaming TV allows for more customization.

"That's why maybe commercials have been sort of invasive to the experience in the past because everybody's receiving the same message," Adlman said. "When it comes to streaming and CTV and connected devices, there's anonymized data that an advertiser can use to target a household. So if I'm selling a car, let me make sure I'm delivering the car message to a household that either has a lease that's coming up to expire or a registration that's coming up to expire."

Still, the number of subscribers who are willing to switch to the ad-supported version varies widely. Streaming insights company Antenna reports about 12 percent of HBO Max's viewers watch with ads, compared to around 58 percent of Hulu's customers.

Not to mention there's so much more competition out there.

"It's getting a little bit crowded right now," Insider's Benes said. "There are so many streaming services that it's tough to stand out with consumers. So just retaining consumers, especially with a high level of inflation, is probably the toughest thing."

Samsung has also noticed the crunch, even though their product comes free.
That also means making sure advertising isn't intrusive, by playing with the number of ads that show up otherwise known as the ad load, especially if viewers start tuning out.

"There's so much choices, and so many content that's sitting out there," Samsung Electronic America's Kim said. "So for us, the landscape has changed where discovery becomes really the main challenge for us to put the right content at the right time."

The hope is that many customers will understand that advertising is the price they have to pay for streaming content, especially if companies can find a way to enhance the experience.

"I don't know if the average consumer can afford to pay multiple subscriptions at the price that they're currently at, to have that many different access points to content," AMC Network's Adlman said. "So at some point, advertising has to play a role."

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