Analyst: AVOD ‘Under Appreciated’ Market Dynamic

While the growth of subscription streaming video services led by Netflix has dominated home entertainment headlines over the years, growth of ad-supported VOD platforms still remains a lurking presence, according to analyst Michael Nathanson with MoffettNathanson in New York.

Speaking Aug. 20 on the DEG: The Digital Entertainment Group Mid-Year 2020 Digital Media Entertainment Report webcast, Nathanson said during the first three months of the coronavirus pandemic streaming video consumption in the United States increased 86% from the previous-year period — driven by Netflix with 32% market share. Nathanson said that among the 28% of streaming services other than competitors Amazon Prime Video and Disney+, ad-supported VOD is gaining the most traction among consumers.

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Major AVOD services include ViacomCBS’s Pluto TV, Disney’s Hulu, Fox Corp.’s Tubi, The Roku Channel, Redbox TV, IMDb TV, Peacock and Shout! TV, among others.

“That 28% of streaming minutes is where we think the streaming wars are actually happening,” Nathanson said. Calling the ongoing COVID-19 pandemic a “once-in-a-lifetime” moment for SVOD, underscored by Netflix adding as many new subscribers in the first half of the year than it did in 2019, Nathanson said AVOD represents a cost-efficient alternative.

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“If you don’t think you want to get into the streaming wars and chase Disney and Netflix down a rabbit hole of spending, you can have advertisers underwrite the cost of content [via AVOD],” he said. “We think this is a place where [media] companies that don’t want to play in the streaming wars, but have content libraries looking for a home will play the game.”

Nathanson projects a quadrupling of revenue for AVOD over the next four years as traditional linear pay-TV  consumption falls and content holders look for alternative distribution channels outside of SVOD. The analyst believes AVOD and other forms of digital distribution will account for 75% of all ad spending by 2024 as linear TV consumption declines and broadcasters move away from original content spending.

“It’s pretty much going to be a digital-only world,” Nathanson said.

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