Will Ads or Subscriptions Prevail with Streaming Consumers?

When it comes to consumers’ evolving viewing preferences and the pitch and yaw of streaming monetization, will we ever see a clear winner between advertising-based and subscription services regarding OTT and streaming content delivery and consumption? Eric Schumacher-Rasmussen, CMO, id3as, Norsk, discusses this topic with Reed Barker, Head of Advertising, Philo, in this clip from their Streaming Media East 2023 keynote.

Schumacher-Rasmussen begins by commenting on the inevitable shift in the demographics of those who watch traditional broadcast TV. However, the overall situation is not as cut and dry as simply looking at how older viewers versus younger viewers prefer to consume media. “I think it’s absolutely crucial to keep in mind that TV means different things to different people, and it means different things to the same person at different times of their lives or at different times of the day,” he says.

He notes that in his 20 years working in the industry, the axiom has been that there is a war between subscription-based and advertising-based TV and that one side will eventually emerge victorious. However, he says, “I think it’s become clear that there’s not going to be an ultimate winner, that there will be a pendulum swing back and forth when different monetization models seem to be winning out, but ultimately neither one’s ever going away.” He asks Reed Barker, “What are your thoughts on where things stand today on the subscription versus advertising front?”

Barker says this debate has been raging for decades and goes back to one of the very first TV ads for a Brooklyn Dodgers game in the early 1940s. Then, once cable TV rose to prominence, the option was to pay a premium on services such as HBO or Showtime not to have to watch ads. Now, he says, the same model has emerged with streaming services such as Peacock, Paramount Plus, and Netflix, which offer lower-priced ad tiers or higher-priced ad-free tiers. However, he notes, “I don’t think there’s a difference between what’s free and what’s paid,” he says. “TV always will be a mixture of two because just paying for a subscription doesn’t really pay for the billions of dollars it takes to create the content that we all want to see. There need to be either ancillary markets for that content, or it needs to be ad-supported in some way.”

Even Free Ad-Supported Television (FAST) channels are expensive to launch, Barker says. “You have to license the library. You have to set up the stream. You have to CDN it out…[and] you need ads to support that.” Ultimately, he says, there is always a baseline cost that must be met no matter what the paid model is for a platform, even for powerhouses such as Netflix. “And then if you can add it with ads to make it cheaper [so that] more people can access the content, it’s a win-win for everybody,” he says.

Learn more about a wide variety of streaming industry topics at Streaming Media Connect 2023.