Industry Voices Michael Grebb

It’s been a crazy time for the streaming business, considering the implosion of CNN+ and continued struggles for the once high-flying Netflix.

But interestingly, this reckoning comes as people are streaming 18% more than they did a year ago, according to Nielsen. People still can’t get enough TV, no matter the platform. And yet most agree there’s too much noise in the marketplace. Subscription fatigue remains a problem, and for those trying to dodge the extra fees by using a friend or family member’s password, well… We know from Netflix’s Q1 earnings presentation that a coming crackdown will force millions to choose between forking over a few more bucks or cutting Cousin Gertrude out of the “Squid Game” entirely. Trust that if Netflix cracks down, so will its competitors. The gravy train is ending.

Consider that Netflix lost subscribers for the first time in a decade, shaving 200,000 from its rolls in Q1. Some of that was because the streamer lost 700,000 subscribers in Russia when it shuttered service there to protest the Ukraine invasion. But even if it hadn’t done so, a quarterly addition of 500,000 subs still would have missed by a mile the SVOD’s already anemic forecast of 2.5 million new subs in the quarter. Now, Netflix expects to lose 2 million more subscribers in Q2 as consumers simply throw their hands up, overwhelmed with too many choices costing too many dollars. It seems like people are starting to resent paying for so many services, and they are looking to either scale back or find new, cheaper alternatives. 

Netflix’s sudden willingness to entertain a cheaper ad-supported version is, of course, quite telling. It comes after years of waving away any suggestion it would disrupt a smooth consumer experience with advertising, but alas… we all compromise in the face of hard realities, and Netflix is no exception. But when we think of the explosion in ad-supported streaming, including a strong slate of AVODs and a growing universe of FAST-live channels, it’s worth asking whether the pendulum has started to swing back to a simpler time when we tolerated advertising to pay for content. No one particularly likes commercials. But in an era of peak streaming, perhaps consumers are willing to compromise to save a few bucks. 

The interplay between AVOD and FAST-live is an interesting one as people take another look at ad-supported options they once spurned. Which will they choose? The on-demand convenience and familiarity of AVOD or the punk-rock, retro channel-surfing ways of FAST-live? According to One Touch Intelligence’s ADTRAKER® service, consumers will face varying amounts of advertising intrusion, depending on which direction they go.

Our monthly audits in the first quarter of 2022 suggest a big difference between ad loads when comparing the AVOD and FAST-live options for major players with both options. For example, Pluto TV served up an average of 9.6 minutes per hour within its AVOD environment but only 6.3 minutes per hour within FAST-live. But it was the opposite situation with The Roku Channel, which averaged 1.05 minutes within its AVOD environment but more than four times that (4.48 minutes) within its FAST-live channels. Tubi and Peacock also served up more ads in FAST-live than within AVOD. Of course, keep in mind that large blocks of unfilled ad time remain rampant within FAST-live, meaning that even if there are technically fewer ads, you may be staring at a logo or a blank screen waiting for the next show to start. 

Also key to the consumer experience is how many times an ad runs repeatedly. Within AVOD environments, duplication can vary by the provider, with Pluto TV and The Roku Channel averaging 58.97% and 43.44% ad duplication in Q1, respectively, while Tubi and Peacock hardly repeated any ads at all at 8.57% and 4.76%. Comcast’s Xumo won the prize, with no ad duplication at all in Q1 when viewed through a browser (although it ended up with 13.79% duplication when using a Roku box). Interestingly, ad repetition within the programming blocks we audited for FAST-live in Q1 sometimes differed greatly from providers’ AVOD environments, with Tubi and Peacock repeating ads at a far higher rate of 53.98% and 39.41% - although it’s important to remember that these are over the course of contiguous 5-hour blocks rather than within specific shows. So, it’s a bit apples-to-orange. 

The bottom line is that consumers are increasingly signaling a limit to how many SVOD services they will pay for month after month. Cheaper or free ad-supported environments may not offer the seamless, ad-free viewing experience they have grown to love, but for those wanting to save a few pennies and still access premium content, AVOD and FAST-live options may become more prevalent in this new, post-boom period for streaming. The marketplace has matured. And consumer expectations may be starting to diversify right along with it.

(More details on the early results of OTI’s recent FAST-live audits are available in this free STREAMTRAK report).

Michael Grebb is 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 Fierce Video staff. They do not necessarily represent the opinions of Fierce Video.