5. Move over Netflix: Free streaming challenges subscriptions
Over-the-top digital streaming TV companies that don't charge people for access are rising as consumers face saturated budgets for subscription content.
Why it matters: While data shows consumers today are less tolerant of ads generally, the rise of these services shows that there's still an appetite for advertising if it's relevant — and if it means consumers can access their favorite content without having to pay a subscription fee.
Driving the news: News broke from Variety's Brian Steinberg on Monday that NBC plans to launch a free, ad-supported streaming service next year to anyone that subscribes to a pay-TV service.
- NBC believes it can get about $5 in ad revenue per user with the service and for those that don’t subscribe to a pay-TV service, the offering will cost about $12 per month, per CNBC.
Last Thursday, Amazon-owned IMDB launched Freedive, a free, ad-supported streaming video channel featuring hit movies and TV shows. The Freedive app can be viewed on mobile, desktop or on Amazon Fire TV devices.
Other free, ad-supported streaming services are growing, too, as subscription streaming services face stiff competition for consumers' budgets.
- Roku's free ad-supported channel, The Roku Channel, is the No. 3 ad-supported channel on the company's platform. It has about half the advertising per programming hour of traditional linear TV.
- Hulu's ad-supported business continues to grow, with the company announcing over $1.5 billion in yearly ad sales this week.
- Even telecom companies, like Dish and AT&T, are beginning to offer free tiers or products for streaming, like AT&T's "Watch" streaming service, which launched last year.
- Free TV services like Xumo and Pluto TV also continue to grow their subscriber bases, as Digiday's Sahil Patel noted last year.
Between the lines: Some of these ad-supported streaming companies, which rely on new-age addressable (digitally automated) TV ads instead of traditional TV ads, could build lucrative businesses.
- Both Roku and Hulu have increased their ad revenues by over 50% years over year. While both are still relatively small in their share of the total digital advertising pie, they are expected to grow quickly over the next two years, per eMarketer.
Meanwhile, subscription streaming growth in the U.S. is slowing thanks to an increasingly crowded market and budget-conscious consumers.
Be smart: One reason these free services are growing is that they have become a win-win for manufacturers, who need to add apps to new smart TV lineups, and for programmers, who need wider distribution for their content.