Only a hybrid future will cater for all types of streamers
Consumers are becoming increasingly accustomed to viewing content without advertising - so what does this mean for ad-funded broadcasters? At Videoscape Europe, ITV and C4 explained their evolving propositions
Commercial broadcasters in the UK are currently in a test and learn phase as they evolve their VOD offerings to cater for different consumer preferences.
According to a report by Ovum, 40% of OTT video users globally prefer an ad-supported subscription model, which keeps the price of the subscription low, such as that operated by Hulu.
Meanwhile, 32% support a higher frequency ad model with no subscription costs, such as YouTube; and 29% prefer an entirely ad-free, pure subscription package, such as Netflix.
This poses a problem for UK broadcasters evolving from a purely ad-funded, linear broadcast model towards an online VOD model as consumers now want and expect so many different things.
To that end, ITV and Channel 4 have both now launched paid-for, ad-free versions of their VOD platforms - dubbed ITV Hub+ and All 4+, respectively, and it could signal some big changes in the broadcast ad market.
"Advertising is still widely enjoyed and will continue, but we've seen a change in consumer behaviour driven by Netflix and Amazon," said Steve Forde, director of digital products and online marketing, ITV, at Videoscape Europe on Thursday (13 June).
"There is now a propensity for viewers to want to pay a monthly fee, and in doing so they've learned the behaviour of watching programming without ads."
Forde said a "small percentage" of ITV Hub's audience is therefore willing to pay for an ad-free experience, allowing ITV to "strike a balance" with what it offers without limiting the scale advertisers require. This is a consequence, he said, of the Internet opening up consumer choice.
To develop this further, Forde said ITV was now looking at offering an annual pass for an ad-free ITV Hub+ as well as packages that could be "gifted" to users so they could watch their favourite shows without the ads for a set time period.
Similarly, Channel 4's modified VOD platform, All 4+, entered a public beta trial this week. The experiment will seek to understand how the market will take to an ad-free, paid-for version of its otherwise ad-supported streaming platform.
Like ITV Hub+, it is priced at £3.99 per month and could draw a mix of new audiences that don't like (and have probably never liked) ads, as much as supplemental income for a broadcaster that is witnessing a decline in ad-revenues.
"Frankly, younger audiences don't enjoy any type of advertising," said Richard Davidson-Houston, the out-going head of All 4.
"They're increasingly seeking out content where there isn't any, so if audiences are rejecting interruptive advertising, then we need to address the problem."
This week, Channel 4 saw sales revenue drops below £1bn for first time in four years, with revenues predicted to be flat for 2019.
In part, dealing with a TV market slow-down requires a hybrid business model - and if a proportion of users is willing to pay to help fill that revenue gap, then it is a no brainer that is what should be supplied.
Coupled with new adtech that will make targeting for advertisers even better, there is a clear strategy to compete on all fronts in the ongoing streaming battle.