What Netflix’s Nominations Mean for OTT Advertising
February 12, 2020 | Article written by Naomi Rabbie
That’s a wrap on awards season, with last Sunday’s Academy Awards closing out the months-long schedule of television and film red carpet events. And, if this season has taught us anything, it’s that traditional networks and studios should be shaking in their boots.
Racking Up Awards
HBO, Amazon, and Netflix all dominated the Emmys, with Hulu picking up one trophy, as well. At the Golden Globes earlier this month, each of these over-the-top (OTT) services walked away with multiple awards in both television and film categories.
And, for the first time in Academy Award history, the highest number of nominations went to a production studio with roots in streaming. Netflix was up for 24 awards and took home 2.
But it’s not just in trophies and nominations where connected TV (CTV) is making its mark this awards season.
Spending Money to Make Money
While streaming services featured heavily during the Emmy Awards, they also made their presence known during the commercial breaks, showing just how stiff the competition is in this arena. Every major streaming service purchased TV ad space to air during the Emmys, with Apple, Netflix, and Amazon buying two ads each.
Even the media companies that had not yet launched their OTT services at the time of the Emmys in September, like Apple and Disney, aired spots during the awards show. (Apple TV Plus and Disney+ both debuted in November 2019, the latter of which registered more than 10 million sign-ups in its first day.)
The Streaming Wars
It’s all part of the latest battle in the streaming wars, where the major providers compete for hearts and subscribers. And, in doing so, each OTT provider must walk a careful line between subscription fees and ad revenue.
Consumer willingness to pay has its limit, according to a recent survey, and that price maxes out at $20 per month for 59% of Americans. Netflix is already charging $13 per month for its standard subscription. As streaming services are forced to bid ever higher for exclusive deals for desirable content, they’ll need to find a way to make up the difference.
Hulu, whose revenue model has always relied on a combination of subscriber fees and ads, began testing out a new ad format this year: “Pause ads” appear on screen when a subscriber to the service’s ad-supported tier pauses content. Viacom’s entry into the market, Pluto TV, launched late last year with a subscription-free, ad-supported model in direct contrast to most of the big streaming players. Analysts argue that even Netflix’s ad-free days may be limited.
How Advertisers Benefit
So, as Madison Avenue pushes its way ever further into OTT, how big will the payoff be for brands? With continuous growth in viewership and a surprising level of receptivity, the potential is looking to be huge.
Roku found that 31% of the U.S. population are cord-cutters or cord-nevers, existing solely on a diet of streaming, and that number is expected to double by 2024. What’s more is that 82% of cord-cutters are happy with their decision to cancel cable.
The volume of viewers is one thing, but their willingness to view ads is another. It turns out that 50% of ad-based video on demand viewers agree that ads can be useful or enjoyable, and a majority don’t mind seeing ads if they’re paying nothing or a reduced fee, according to the Interactive Advertising Bureau.
And the ads are working! Extreme Reach’s 2019 Video Benchmark Report found that connected TV ads have an unprecedented 97% completion rate. This is in comparison a 77% completion rate for mobile video.
CTV viewership is growing at an astronomical rate, and the inability for viewers to skip ads or change the channel means OTT advertising offers marketers an unparalleled opportunity in terms of both scale and engagement. Taken along with OTT’s programmatic sales models and unique targeting capabilities, streaming services should be a significant focus for advertisers in the coming months.
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