The changing business models in video streaming
What do the changing business models in video streaming, and the broader media landscape tell us about how brands will need to adapt their marketing approach in order to successfully reach and engage affluent audiences?
The first wave of video streaming was defined by the seismic disruption that the likes of Netflix and Amazon brought to the traditional TV and film industries.
Underpinned by huge levels of investment, these companies revolutionised audience expectations, offering swathes of premium content at an unbelievable price, and a fully ad-free experience.
As the market has matured, and more players have joined, a hybrid model is emerging, with audiences offered a choice between ad-supported and ad-free packages.
Whilst Netflix asserts it has no plans to bring in an ad-supported tier anytime soon, the likes of Hulu, Peacock, and HBO Max all offer ad-supported alongside their ad-free package, and even Disney+ announced earlier this year plans for an ad-supported pricing tier late in 2022.
It’s too early to know how big each segment will ultimately level out at, but the fact that there will be two different models and ways of subscribing to most major streaming platforms is significant.
Whilst on first inspection the emergence of ad-supported models appears good news for brands that reach their audiences through advertising, I actually think it creates a major challenge.
It means that we’ll now see a stratification of audiences into two groups – those that put up with ads to reduce their monthly streaming bill and those that can afford to pay to avoid them entirely.
Previously, with cable and TV subscriptions there was no choice. It was one approach for all of us, and we all saw the same ads. But with a two-tiered model, advertisers will become more limited in who they can reach, as those with the propensity and affluence to pay to avoid ads, will be able to do so.
What’s interesting about this shift, is that it’s not just something that’s seen in video streaming – it’s a trend that’s seen across many of the media platforms that command so much of our attention.
In music streaming, there have long been ad-supported and ad-free models in play, with 45% of Spotify’s 365M monthly users being Premium subscribers. The explosion in popularity of podcasts has also seen a hybrid model emerge – whereas initially, podcasts were almost exclusively ad-supported, we’re now seeing a number of high profile podcasts turning to ad-free models, whether through direct subscription or as part of new offers like Apple’s Podcast Subscriptions service.
This hybrid model is also seen in publishing, where the majority of traditional broadsheets host content behind a subscriber paywall, with others remaining free to access, in return for advertising.
Even social media platforms, those who’ve made their fortunes from an advertising business model, are getting in on ad-free subscriptions. Will Twitter Blue be an early pioneer for an ad-free social media experience?
The emergence of this kind of two-tier system has consequences for brands that rely on reaching their audiences through advertising. If it becomes established practice across the media world, it will require a shift in many marketing strategies.
For audiences that choose ad-supported, it’s business as usual, with the likelihood of many more channels and opportunities to reach and engage through traditional advertising.
But if you’re a marketer targeting audiences who have the inclination and the disposable income to pay to avoid ads in their life, how do you adapt?
You can’t rely on what you’ve done before. You need your marketing to adapt to fit your audience’s expectations. You need to start developing an entertainment and branded content strategy.
Don’t fear, there’s help at hand, with a burgeoning set of experts to guide you through it, and many brands that have already demonstrated how to successfully leverage branded content and entertainment.
Start investigating and making incremental investments today, you’ll thank yourself in the future!