On this week’s episode of our new podcast Amobee Out Loud, we discuss one of the industry’s most hotly debated topics: the future of streaming. For audiences under 25, streaming is the primary source of entertainment, and the streaming industry has seen exponential growth since the beginning of the pandemic.
Alongside that growth, there has been an explosion of business models and approaches that raises questions such as: how many streaming platforms can consumers really tolerate? Which business models are built to last? Why are weekly episode releases re-emerging as the dominant content strategy? And what does recent news about Netflix and Warner Bros/Discovery forecast for the future of the industry? We tapped Andrew Rosen, founder of PARQOR, for his insights on all of this.
Battle of the Business Models
How many streaming services can really survive? Andrew says that it remains to be seen, but so far there are two sides to the streaming bet: one approach is the niche streaming services that target smaller audiences, such as Crunchyroll, which targets anime fans, or Starz, which serves content primarily for Black and female audiences. These niche streaming services have small subscriberships compared with streaming platforms that have bet on scale, like Netflix or Disney+. Whether they bet on niche audiences or scale, the streaming services that have struggled to survive are those that haven’t picked their battles very well. In recent months, Peacock and Paramont+ seem to be finding their footing – Peacock, through publishing original content, and Paramount+, through finding their niche with a mix of children’s content and sports.
Among the plethora of streaming platforms available, there’s a question of which business models will win out in the long term. There are the SVODs (subscription-based video on demand), AVODs (ad-supported video on demand), and FASTs (free ad-supported TV). Which model will win the majority of consumer preference and how big of a role advertisers will play is a major question unfolding at the moment. Andrew predicts that FASTs will emerge as a major segment because they offer hundreds of thematically segmented content streams with live viewing options, citing a recent Twitter thread from IAB CEO Randall Rothenberg on the topic:
“[FASTs] are self-contained: the viewer can hop from star to star, from galaxy to galaxy, within each universe, without ever having to leave for another universe,” said Rothenberg. In other words, it creates a more immersive experience for the viewer than SVOD or AVOD models and allows them to consume content passively for hours at a time, much like its linear counterpart.
Ultimately, the streaming platforms that will last are the ones that offer the most immersive experiences – the deeper the “universe” for viewers to explore, the better. In his aforementioned Twitter thread, Randall Rothenberg points to the recent Warner Brothers/Discovery merger moving all content into HBOMAX as an example of a media company trying to grow and deepen one main universe, rather than creating many small universes (goodbye, CNN+).
The Return of Weekly Episode Releases
Among the SVOD services, there’s been a growing trend of weekly episode releases, unlike the early days when Netflix set the bar for releasing entire seasons at once. The reason? Subscriber churn, says Andrew, especially for streaming platforms that are struggling to grow their universe of content, like Disney+. By releasing episodes weekly, streamers are able to keep subscribers who join the platform to watch a new show for much longer and those subscribers are less likely to cancel as soon as the season is over.
Where Do Advertisers Fit in the Streaming Multiverse?
Historically, legacy media companies corrupted the linear viewing experience by oversaturating their content with commercials. Today, AVOD platforms have limited commercial loads, but viewers, streamers, and advertisers alike are all wondering: will the industry be able to strike the right balance between advertising and content to keep the streaming experience enjoyable, while making it an effective mode of advertising for brands? Andrew says there are two differing perspectives between the supply and demand sides of advertising.
“The supply side says, ‘here’s all this inventory that we can use to target consumers in ways we used to dream about when all we had was linear,’” explains Andrew. Yet advertisers remain skeptical of those economics. Advertisers are used to seeking the cheapest possible inventory to reach some of the people who may be interested in their brands. The new paradigm presented by streaming is to spend the most amount of money for the least amount of ads to reach the biggest number of people. It helps control for frequency and reach, but advertisers are still in the habit of prioritizing price first.
Recent news about Netflix’s high customer churn and their potential pivot to an ad-supported model suggests that advertisers are just as vital to the future of streaming as they have been to every other form of media.
It is a smart, eye-opening conversation with Andrew and we’re eager to see how his predictions play out for the industry in the coming months. Will FASTs emerge as the favored form of streaming for audiences? Will advertisers accept creator content as premium content? How will companies like ROKU adapt as more legacy media companies end their licensing deals to create their own app experiences? We’re interested to see how Andrew’s predictions play out over the next year.
Join us next week as we continue to explore the ever-evolving media landscape on Amobee Out Loud. Find the full episodes and subscribe here. If you enjoying the podcast, be sure to leave a review and join the conversation on our LinkedIn, Twitter, and Facebook!
Founded in 2005, Amobee is an advertising platform that understands how people consume content. Our goal is to optimize outcomes for advertisers and media companies, while providing a better consumer experience. Through our platform, we help customers further their audience development, optimize their cross channel performance across all TV, connected TV, and digital media, and drive new customer growth through detailed analytics and reporting. Amobee is a wholly owned subsidiary of Tremor International, a collection of brands built to unite creativity, data and technology across the open internet.
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