With new streaming services being released everyday and YouTube thriving off their unskippables, advertising may soon burst into the streaming world.
Earlier this month, Google decided to switch things up as they finally revealed YouTube’s advertising revenue. In 2019 alone, the video-streaming platform generated $15.15bn just off advertising with reportedly $3bn paid to the music industry.
Looking back on it’s history, YouTube has always been ahead of the curve. Released in 2005, the platform revolutionised how people shared information and essentially established itself as the first streaming service.
Fast forward 15 years and streaming services are flooding the market and the need for revenue is increasing. And with YouTube laying the blueprint for other services, advertising may soon come back to haunt us on our streaming services.
Consumer Electronics Show
Held in early January, the 2020 Consumer Electronics Show housed conversations between media companies, major brands and advertising agencies. NBCUniversal was at the centre of attention with their streaming service, Peacock, set to be released in April and will feature major Universal titles.
NBCUniversal revealed that Peacock will be launched alongside their new product, ONE PLATFORM. The product is set to provide new tools for advertisers to measure their impact and purchase ads. Ads purchased from ONE PLATFORM will also be featured on Peacock.
Said to have a reach that imitates Facebook and YouTube, the NBCUniversal chairman of ad sales and client partnerships is shocked that this market hasn’t been tapped into yet.
“It’s really just shocking to imagine that the buying and selling or the trading of TV advertising hasn’t changed since it began […] So now with the ONE PLATFORM you’ll be able to take the large scaled audiences that NBCUniversal has. If you think about it in 2020 alone, NBC will produce 110,000 hours of premium content across every one of our screens. Now, finally, the advertiser can access those audiences, just the way the consumer interacts with all that content” – Linda Yaccarino, Chairman of Ad Sales and Client Partnerships
Essentially, consumers will be provided with the option to have a paid or free subscription to Peacock. The free subscription service will feature five-minutes of advertisements for every hour of viewing time. A similar concept to that of YouTube and YouTube Red.
According to a study conducted by Magna, US television advertising sales will fall by 1% in 2020. The study also states that sales fell by 3% in 2019, generating $2bn. In comparison with YouTube revenue, streaming services could potentially overthrow advertising in television.
“Marketers are standing back and saying, ‘What about us?’ There’s this call for the advertisers: If people are going to be enjoying content over the top, direct to the consumer in a streaming fashion, there’s got to be a place for advertising.” – Michael Kassan, Medialink CEO
NBCUNiversal isn’t alone either in their endeavours with Amazon reportedly working on an ad-supported streaming service in partnership with IMDb TV.
As for now, Peacock will have to compete with Tubi – a free video-on-demand streaming service. Founded by Farhad Massoudi, the service features advertisements during unskippable commercial breaks and is said to cater to over 20 million subscribers.
NBCUniversal has not revealed whether Peacock will be released in Australia as well.
The Big Boys
Of course, not everyone is on board with advertising on streaming platforms. Netflix CEO, Reed Hastings said that the company is “focused on streaming and customer pleasure”.
Hastings continued by saying that the company is not interested in the extra consumer monitoring that advertising requires. Collecting information such as consumers’ locations does not appeal to the CEO who refers to the action as “exploiting users”.
In the last few months, Netflix has been fending off competition with the release of Disney+ and Apple TV+ – both of which are ad-free services.
Advertisements aren’t fun for consumers though and maybe holding off on ads could be a winning factor for major streaming services.
“We think with our model that we’ll actually get to larger revenue, larger profits, larger market cap because we don’t have the exposure to something that we’re strategically disadvantaged at which is online advertising against [Amazon, Google & Facebook]” – Reed Hastings, Netflix CEO
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