Will AVOD Overtake TV Advertising in North America?

Disney+ is set to launch an ad-supported tier on Dec. 8, starting at $7.99 per month in the United States — $3 less than the $10.99 ad-free tier, with a new price point that goes into effect the same day. Netflix is expected to bow an ad-supported subscription tier globally in early 2023, following a smaller launch in the United States by the end of the year. In addition, the SVOD giant announced in July that it would partner with Microsoft for global advertising insertion within the ad-supported tier.

With YouTube (Google) and Freevee (Amazon) already well established in the AVOD landscape for years, the arrival of three of the remaining U.S. streaming giants sets up a new stage in the transformation of the video market in the country.

New intel from Dataxis finds that AVOD consumption among consumers has been outpacing SVOD for the last 18 months. The latest data collected separately by TVision at the end of 2021 found that almost 30% of households had more than 10 apps installed on their smart-TV — with a growing number dedicated to generic AVOD and FAST services.

According to Dataxis, AVOD is increasingly seen as a way to better promote existing SVOD offers and increase global retention — especially in the FAST segment, where CPMs (cost-per-thousand impressions) are growing quickly but remain low.

In discussions with executives from various AVOD services operating in the United States, Dataxis found a significant increase in engagement across every type of AVOD content, and a bigger potential when it comes to advertising insertion on connected smart-TV sets (CTVs).

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Indeed, a separate study conducted by DeepIntent and LG Ads reportedly found that 64% of viewers with connected TVs would rather see ads than pay more for ad-free content, highlighting the important gap observed between an increasing demand for content, and the constraints of households’ budgets, which cannot absorb an infinite number of SVOD services.

This constraint has been especially understood by U.S. regional TV networks, which had been facing a decline in their viewership since the rise of SVOD, while struggling to adapt their business model to the digital shift. While SVOD was not particularly suitable for their content offerings, revolving around local news, weather, or regional sports, AVOD represents a tremendous opportunity to re-linearize U.S. regional TV networks’ content online, especially through FAST channels.

To catch up with a belated digital transition, regional TV networks are now heavily investing in CTV distribution and FAST re-bundling. In less than a year, Scripps Networks, one of the biggest regional TV networks in the United States, upped CTV distribution by combining its FAST channels (Newsy, Ion, Court TV) to ensure their availability through a wide number of devices and platforms.

Dataxis expects the U.S. AVOD market to overtake the traditional advertising TV market by the end of 2025 in terms of revenue. This represents tremendous growth as a domestic AVOD market barely accounting for 10% of the advertising TV market five years ago.

While until now, the growth has mainly been driven by Youtube and its dominance in the AVOD landscape, AVOD revenue in the next few years is expected to be driven by the multiplication of FAST channels from traditional content owners, the re-bundling of existing content offers toward more ad-supported options, and a wider availability of these offers across the largest number of devices, CTVs and platforms possible.

“While platforms like Roku or Samsung TV Plus are expected to become leaders of the FAST landscape due to their significant presence in the CTV market, an ad-supported service such as Pluto TV could also manage to win on both sides, providing Paramount content through its own channels, and aggregating a growing number of external channels through distribution partnerships,” Thibault Giry, senior analyst at Dataxis, wrote in the report.

Streaming Video Represents 33% of All TV Subscriptions in the Nordics

New intel from Dataxis finds the pay-TV landscape in the Nordics has changed considerably since the introduction of OTT video services.

The region has been a testbed for some of the most popular streaming services when they first addressed the European market, with Netflix and HBO available there since 2012.

Fast-forward 10 years and the adoption of streaming services and its impact on content viewing consumption have produced a digital makeover to the local TV distribution industry.

Hollywood streaming services such as Netflix, Disney+, Paramount+ and HBO Max are aggressively pursuing operations in the Nordics.

The region historically counted as one of the most developed pay-TV markets in Europe, with virtually every household subscribing to a service, and an average monthly revenue per household of €25 in 2015. But a growing number of households have pulled the plug on their traditional TV plans in favor of standalone OTT platforms, driving historical TV operators into diversifying their service portfolio and introducing more flexibility in their bundles in order to retain customers.

Due to their role as forerunners of the streaming market in Europe, the Nordics, which include Norway, Sweden, Denmark and Finland, is the region with the largest number of streaming services.

To simplify video choices, content distributors have multiplied distribution deals with video-on-demand platforms to position themselves as super aggregators. Nordic telecoms became the preferred distributors for third-party service such as Paramount+, when it launched in the region in 2021. Britbox, the U.K.-based SVOD platform, launched in the Nordics in the first half of this year and chose C More (in Sweden, Denmark and Finland) and TV2 Sumo (in Norway) as its partners.

Streamers now represent a third of the total pay-TV subscriptions in the Nordics, against less than 18% in the rest of Western Europe. This penetration is leading to market saturation and consolidation, according to Dataxis.

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In Finland, the leading paid OTT services, Viaplay and Elisa Entertainment, operated by local telco and content producer Elisa, merged their portfolio into one bundled subscription at the end of last year.

The region’s TV broadcasters now operate their own streaming platforms, including Viaplay, which passed the 2.5 million subscribers last quarter, TV2 Play in Denmark, which reaches 800,000 households, or the Swedish platform C More, which counts around 1 million paying subs across 3 markets.

“If streaming services are less expensive to operate than historical pay TV platforms like satellite, and thus can be sold through way cheaper plans, significant pressure is put on traditional telcos to take down their prices to be able to follow up with streamers’ pricing and line of service,” Ophélie Boucaud, senior analyst at Dataxis, wrote in the report. “TV distribution revenues in the Nordics are expected to stagnate at around €2.8 billion despite a slow rise in terms of subscriptions as those will mostly count OTT plans, and more cord-cutters will switch off their expensive TV plans.”

Report: 4K Set-Top Box Global Installed Base Reached 31M units in 2017

4K UHD content available on pay-TV and broadcast may be limited, but that has stopped proliferation of 4K-compatible set-top devices by pay-TV operators.

According to new research from Dataxis, the global installed base for 4K set- top boxes has grown more than 900% to 31 million units, at the end of 2017, compared to only 3 million units in 2015. Operators around the world are deploying 4K boxes in response to sales of 4K-compatible televisions, which is reflecting in the global numbers, according to the report.

Notably, Europe is growing at the fastest rate accounting for 52% of the total 4K boxes in 2017, followed by Asia-Pacific excluding China (32%), North and Latin America (5%), Middle-East (4%) and Africa (1%).