August 20, 2020
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.
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.
“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.