While the 2010s were undoubtedly the decade of SVOD streamers, some believe that AVOD services will the big story of the 2020s. Tim Dams reports.


AVOD: ad-supported streamers building scale

If you were to launch a streaming platform today, it might seem obvious to go down the paid for, subscription video on demand (SVOD) route.

After all, most of the big platforms that are new to the market or are set to launch this year are following the SVOD model. Disney+ is charging $6.99 a month, Apple+ costs $4.99 and HBO Max is priced at $15 a month. Short-form service Quibi launches in April starting at $4.99 a month with ads.

They have followed down a well-worn route, trodden by pioneering SVOD Netflix ($12.99 for a standard plan) and Amazon Prime ($119 per year or $12.99 per month).

Netflix built a strong business in the early days of online video by offering premium content to early OTT adopters who were prepared to pay for it, many of whom were typically younger and higher earners than mainstream TV viewers.

But there are signs that things might be starting to change. While the 2010s were undoubtedly the decade of SVOD, some believe that the 2020s will be the decade of AVOD (advertiser video on demand) services.

Slowly but surely ad-supported streamers which are free to view like Roku TV, Vudu, Pluto TV, Crackle, Tubi and IMDb TV are starting to build scale and to roll out internationally.

Earlier this month, for example, Tubi – which is currently available in the US, Canada, Australia and New Zealand - announced it will launch in Mexico this year, on top of a planned debut in the UK this Spring.

Meanwhile, ViacomCBS’s Pluto TV announced it is expanding its UK offering with new channels dedicated to British film and TV miniseries.

Research published by Ampere Analysis this month said that usage of the key US AVOD services is still relatively low. It found that monthly users of services like Crackle, Roku TV, Tubi, Vudu and Pluto represented only between 3-6% of US online households. “But the low usage, especially when compared to SVOD peers, belies the quiet before the storm. Where SVOD once trod, AVOD will now head, with implications for content licencing and the global advertising market.

Ampere Analysis research director Ed Border says that the AVOD market is likely to grow as online viewing’s share of total TV viewing increases.

Indeed, this seems only natural. SVODs have thrived by luring subscribers away from traditional pay-TV businesses with premium content and a relatively cheap and very convenient service.

Where SVOD once trod, AVOD will now head, with implications for content licencing and the global advertising market.” Ampere Analysis

AVOD platforms look set to do the same to many free-to-air commercial broadcasters, by offering a huge range of content online for free in one convenient place. Tubi, for example, has 20,000 titles available in the US, ranging from reality shows through to indie films.

Making the new out of the old
Most of the content on AVOD players is old. Ampere found that new AVOD players average nearly 80% of catalogue over five years old, providing a new and lucrative market for distributors for licencing deep archive.

In fact, last week Endemol Shine International sales boss Matt Creasey told TBI Vision that AVOD companies such as Tubi, Roku and Pluto TV pose an “existential threat” to the future of traditional broadcasters. For distributors like Endemol Shine, which has some 65,000 hours in back catalogue, AVOD has become an important customer-base – and he thinks the potential for AVOD will grow at the expense of linear broadcasters.

“We’re seeing such financial growth in AVOD services, we have to ask whether we should even be doing those linear deals that will cut us off from doing other deals for so long,” Creasey said.

Ampere’s Ed Border points out that it’s important to distinguish between different types of AVOD services. YouTube is a good example of an AVOD service, but it has built its business largely via short form, user generated content.

Commercial broadcasters also offer their own AVOD services, most of which are catch up offers such as ITV Hub and All4 in the UK. Both offer paid-for services without the ads, ITV Hub+ and All4+.

In the US, NBCUniversal is following a similar model with its soon to launch Peacock streaming service. Peacock has three tiers: one with ads that’s free but has limited content, one that’s $5 a month with ads, and one that’s $10 a month without ads.

Pluto TV, meanwhile, streams a selection of live channels such as Get.Factual or TV Westerns, offering a wide variety of library content that is scheduled like a linear broadcaster.

Others like Tubi, Crackle, Vudu and Roku are purer VOD services, offering a wide selection of content on their platforms.

Tubi chief content officer Adam Lewinson bills the service, which launched in the US and Canada in 2014 and is based in San Francisco, in a straightforward fashion: “Essentially, it’s free Netflix.”

However, Lewinson says Tubi is a very different kind of offer. SVOD services, he argues, fund premium content such as The Crown or House of Cards. “We refer to that as the 1% of content. It’s amazing and is truly some of the best that TV has to over. But it is just a fraction of what viewers want to watch.”

TV viewership, argues Lewinson, has become “highly fractionalised.” Beyond premium series or communal events like the Superbowl or Premier League matches, everybody is watching different kinds of programmes. “That is where AVOD fits in. We have amassed a very deep library. We’re not focused on this 1% of content that SVOD is focused on. We’re focused on everything else.”

Tubi, he adds, has no plans to invest its $100m+ content budget in original programming. “Our content library is so significant, and our viewers are more than satisfied with our content offering – it’s a very risky road to have originals.”

In the US, he says Tubi tends to appeal to a young demographic, with a median age in the low 30s. “It’s among the youngest of the streamers in the States. And they are very cost-conscious.”

“We have a amassed a very deep library. We’re not focused on this 1% of content that SVOD is focused on. We’re focused on everything else.” Adam Lewinson, Tubi

Compliementary service
Lewinson says that US households may have one or two SVOD subscriptions, but then are using Tubi to complement this.

And what are they watching? Reality TV is “an incredibly strong category”, says Lewinson, as are indie movies through to mainstream Hollywood action and comedy films. Niche areas such as black cinema, anime, LGBTQ and Latinx are also fast growing genres. In the US, he says that every single one of Tubi’s 20,000 titles gets viewed once a month.

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AVOD: Being careful not to run too many ads is key

Tubi’s upcoming Mexico launch is its first move into a non-English language territory. “The demographics are absolutely perfect for AVOD,” says Lewinson, reiterating that ad-funded streamers appeal to a young, cost-conscious audience.

Advertisers are also embracing services like Tubi, says Lewinson. “Linear is in secular decline. We’re seeing a trend for media buyers moving their money from linear and digital, and in particular, moving it into AVOD.”

Mainstream brands – from car manufacturers, fast food restaurants, insurance companies through to drinks firms – advertise on Tubi. “The ad experience doesn’t look and feel that different than watching linear TV – with the exception that we have less than half the ad load of regular TV. It’s much better for the viewer and for the advertiser because there is less clutter.”

He pushes back on the suggestion that younger audiences who are used to an ad free experience on SVOD platforms are put off by commercials on AVOD. Being careful not to run too many ads is key, he says, as is not repeating the same commercial over and over – which has historically been a big complaint of AVOD viewers. “There’s an understanding that this is a fair transaction for their time. It’s free content in exchange for ads.”

Ampere argues that the rush to AVOD means that “more ad spend will shift to online video, and as AVOD platforms are already spreading globally, that will have implications across multiple markets.” Ampere adds that the trend will be “supercharged” by some of the studio direct models, including Disney’s Hulu and NBCUniversal’s Peacock, adopting a hybrid SVOD/AVOD model.

Winning eyeballs
Walter Iuzzolino, co-founder of international drama streaming service Walter Presents, which is available in markets such as the UK, US, Australia, Italy and Belgium, says launching as an AVOD has been key to its success, helping to shape the service from the outset.

“It meant we had to be mainstream and not niche,” says Iuzzolino. “The scariness about AVOD is that it is ad supported, so you live or die by the number of streams you get. If you don’t get any, you can’t acquire any programming.

“But it was a winning strategy – ultimately anyone could get Walter Presents free of charge. When we launched with Deutschland 83 we truly were in the households of millions of British people. That tipped the balance. Had we taken another path, it might have been much harder to reach the level of penetration in people’s consciousness that we have achieved.”

One challenging issue facing AVODs, however, is how to get viewers to watch their shows in the first place. With so many OTT services, how can AVODs achieve the prominence to get people to the platform?

“The scariness about AVOD is that it is ad supported, so you live or die by the number of streams you get.” Walter Iuzzolino, Walter Presents

One way could be by searching for specific content through an aggregation service, such as Apple TV, which can take viewers to the relevant AVOD players.

Ampere’s Ed Border notes that AVOD players are increasingly partnering with hardware firms to boost consumer awareness.

Tubi, for example, announced a deal early in January with Hisense, the third-largest television manufacturer in the world, to offer its library of over 20,000 movies and TV shows on Hisense’s new Vidaa platform – which will see Tubi preloaded and prominently placed on its home screen. Tubi’s Lewinson says there will promotions at retail stores too.

Often they are not just partnering with manufacturers, but with local partners too to drive awareness. For its Mexico launch, Tubi has partnered with local broadcaster TV Azteca which will offer advertising sales for Tubi in Mexico and promote the service to its audience via online and other platforms.

The streaming world will be watching closely to see how Tubi and other AVOD platforms fare as they look to expand in the coming months. If anything, by the end of the year we’ll have a much clearer idea about whether the 2020s really will be AVODs decade.