In launching an advertising-inclusive variation of HBO Max, WarnerMedia is focusing attention on a pivotal underpinning of the new video ecosystem: how commercials fly in and out of the picture.
Practices and policies around advertising insertion are paramount (apologies to ViacomCBS for the pun) within the fast-growing advertising-supported streaming category. As more viewers flock more frequently to AVOD services, attentiveness to commercial cadence has taken on new importance.
A lot of the attention surrounds ad repetition and total commercial volume, and rightly so. But AVOD players like Discovery Inc., NBCU, Fox Corp. and others aren’t just working to out-do one another when it comes to governance of total commercial time allotments. They’re also applying a more tender touch around fundamental advertising aesthetics. It was fascinating to hear WarnerMedia EVP Sarah Lyons explain at the recent FierceVideo Stream TV Show that WarnerMedia has assigned responsibility to individual staff members – actual human beings – to watch HBO Max shows with an eye toward determining where advertisements might appear so as to seem minimally intrusive to a program’s mood, storyline, and rhythm. Lyons said the idea is to find “natural pauses” in the story arc where advertising can gently be integrated.
Roku Inc. is another participant that’s paying close attention to the aesthetics of advertising and UX. For the company’s homegrown Roku Channel, there are no advertisements at all within the normally coveted pre-roll positions that precede program streams. Instead, viewers are whisked straight-away into their requested shows as part of a “viewer-first” ethic.
These approaches are a far cry from the all-too-familiar consumer experience of seeing video streams cavalierly interrupted at illogical break points by commercial messages. YouTube users in particular have little choice but to tolerate odd, asynchronous insertion of advertising with little regard for how interruptive it may be. The sudden intrusion of a commercial message just before the rave-up chorus of a rock music video is, sadly, a common malady. (At least to those of us who, you know, enjoy rave-ups to begin with.)
As for the issue of commercial time at large, we’re seeing a fairly wide divergence of approach among leading AVOD services. Based on our latest One Touch Intelligence ADTRAKER audit, average hourly commercial time during AVOD sessions we monitored in May 2021 ran from less than three minutes (Paramount+, Peacock, Tubi and Xumo) to slightly more than five minutes (Pluto TV and Crackle).
Our suspicion is that going forward, AVOD commercial loads could descend toward the lower number as an interesting competitive angle comes in to play. The discovery+ or Peacock viewer who becomes accustomed to relatively few interruptions may find the experience of seeing 2x that amount of messaging jarring elsewhere. Thus, we presume there will be a natural gravitation across the AVOD category to less advertising exposure, not more.
How that translates to AVOD economics is the big question. Less advertising time doesn’t necessarily mean lower advertising revenues, given that the ultimate economic contribution of advertising hews to a formula involving cost-per-thousand rates, audience levels and inventory availability. An upswing in any of the three can mean revenue improvement. We know from comments made by senior Discovery Inc. executives that the company likes what it’s seeing on the rate front, where CPM rates on discovery+ have been running up to 3x higher than what the company sees from legacy cable TV advertising environments. So even if Discovery is tamping down inventory availability for the new streaming service, it’s seeing a positive offset on rate.
A similar positive story is in the making for the Crackle AVOD service. Bill Rouhana, the CEO of Crackle’s owner Chicken Soup for the Soul Entertainment Inc., pointed out while discussing first quarter 2021 financial results that advertising CPMs are rising as targeting capabilities improve and demand for OTT ad positions intensifies.
The upshot: Although much of the focus is on the relatively prosaic metric of ad minutes per hour, the real story is more intricate, with an increasing emphasis on the aesthetics of advertising insertion. By eschewing robotic insertion formulas and instead relying on human beings to decide where ad breaks fall, HBO Max may be setting a new standard for the AVOD viewer experience that benefits advertisers – and the end users who watch the commercials.
Stewart Schley is Senior Vice President and Lead Analyst for One Touch Intelligence, which provides market intelligence and industry analysis services for leading companies in the media and telecommunications space. The One Touch Intelligence STREAMTRAK® series is a complimentary service offering industry professionals insights and context around developments in the digital media sphere.
Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceVideo staff. They do not represent the opinions of FierceVideo.