×
You will be redirected back to your article in seconds

New Streaming Strategies From Comcast, Viacom Target Subscribers Who Don’t Need Netflix (Analysis)

Despite what Netflix’s success may lead you to believe, the road to riches in streaming isn’t all about subscriptions.

As the shift to digital causes the audience for linear TV to shrink, companies in the media space are increasingly looking to generate revenue via advertising-based video on demand (AVOD) services.

• NBCUniversal announced last week it plans to launch a streaming service with an ad-supported and ad-free tier in 2020. And during Comcast’s Q4 2018 earnings call on Wednesday, NBCUniversal CEO Steve Burke said the company thinks it “should start and try to gain as much scale as possible with an ad-supported free streaming service,” implying the company is prioritizing the growth of its new streaming service’s free tier over its paid tier.

Viacom on Tuesday announced that it agreed to purchase Pluto TV, an AVOD service, for $340 million. Viacom’s ad business will be bolstered by the 12 million monthly active users and additional commercial inventory that Pluto TV offers.

• Hulu lowered the bar for entry to the ad-supported portion of its own subscription plans to $6, revealing new pricing Wednesday that also included a hike to its pay-TV bundle.

It makes sense for media players to chase revenue on streaming services via ads, rather than subscriptions, because the SVOD market is getting saturated from super aggregators like Netflix to more niche players.

The average U.S. consumer is subscribed to between 2-3 streaming services, and one of those is “almost always” Netflix, according to Lab42 founder Jonathan Pirc, citing an October 2018 survey by Lab42.
Netflix has the highest retention rate when compared to its rivals, so this means companies late to the streaming game are more directly competing against other services like Hulu and HBO Now for wallet share when they launch.

Even so, some companies new to the streaming game may find it hard to find footing in the SVOD market, as companies like Hulu further lure customers with its award-winning originals. New-to-market services in 2019 with buzzy content like Disney+ will make it even more difficult for companies like NBCU to win wallet share in the SVOD marketplace. This helps explain why during NBCU’s research, the company found most consumers indicated they’d rather endure 3-5 minutes of ads for free access to its service than pay $10 per month.

Moreover, companies entering the AVOD game have the opportunity to attract viewers that haven’t signed up for Netflix, which puts itself further out of reach of that segment of the audience by announcing last week its own subscription price hike. Netflix’s service doesn’t show ads, and the company in the past has expressed much hesitation in introducing commercials to its service.

And if Comcast and Viacom are lucky, their new streaming offerings will appeal to existing Netflix subscribers looking to maximize their content options, too, particularly for the segment of the population open to paying for 3+ subscriptions.

And if Netflix ever flipped on its no-ads policy, its subscriber base would likely shrink as a result — 23% of current Netflix subs said they’d definitely drop the service if it started running commercials, per Hub Entertainment Research. This implies that companies launching or acquiring AVOD services don’t need to worry about competing with an ad-supported Netflix any time soon.

The reward for launching a successful AVOD service is becoming increasingly lucrative for players like NBCUniversal and Viacom. Magna predicted ad spend on OTT TV content to grow 40% year-over-year to $2 billion in 2018, for example. Meanwhjle, NBCUniversal projects they can generate nearly $5 per user per month with its 3-to-5 minute per hour ad load on its service, per Variety.

This implies that even if just 10% of the 52 million consumers Comcast and Sky reach become regular users of NBCU’s service, NBCU could still see additional ad revenue somewhere in the ballpark of nearly $26 million per month. Building out a new source of ad revenue is especially significant for companies like NBCU and Viacom as brands’ ad dollars follow eyeballs from traditional TV to digital platforms in the future.

More Digital

  • eOne Names Bill Wilson Senior VP

    eOne Names Bill Wilson Senior VP

    Entertainment One (“eOne”) has tapped Bill Wilson as Senior Vice President Digital Operations and Innovation, Music, the company announced today. Wilson will oversee all aspects of digital strategy across the company’s music business, including label service, talent management, music publishing and live entertainment, according to the announcement.  Wilson will be based in New York City and [...]

  • Jennifer Kaytin Robinson Someone Great

    'Someone Great' Director Jennifer Kaytin Robinson on Reimagining the Rom-Com

    Jennifer Kaytin Robinson, creator of the MTV series “Sweet/Vicious,” recently made her feature debut with “Someone Great,”  now streaming on Netflix. The film follows three friends as they navigate relationships and work in New York City.  Here, the writer-director opens up on reimagining the rom-com, and women changing the face of Hollywood. The three young [...]

  • Hulu-Logo

    Comcast Mulling Sale of Hulu Stake to Disney (Report)

    Comcast is holding talks with Disney to see if they can hammer out a deal to sell Comcast’s one-third stake in Hulu to the Mouse House — which would give Disney full control over Hulu, CNBC reported. The report comes a little over a week after AT&T sold its 9.5% stake in Hulu to the [...]

  • Cox Cable Testing a Form of

    Cox Cable Testing Gamer Network Service to Reduce Lag

    UPDATED: Cox Cable is testing a new “Elite Gamer Service” that is designed to speed up connections between gamers and games, but which the company says doesn’t prioritize internet use. The service began testing in Arizona this week and Cox tells Variety it plans to run the test for about three weeks. The $15 a [...]

  • Angie-Nwandu-The-Shade-Room

    The Shade Room, a Top Instagram Celebrity and Gossip Publisher, Unveils First Slate of Original Series (EXCLUSIVE)

    The Shade Room, a top Instagram-based media publisher focused on black culture, entertainment and celebrity gossip, is launching three new original series on the social platform. The five-year-old venture, the brainchild of entrepreneur Angelica Nwandu, runs one of the most highly engaged accounts on Instagram: @TheShadeRoom, which has 15.3 million followers (referred to as “Roommates”), [...]

More From Our Brands

Access exclusive content