Companies Rethink The TV Ad Model For OTT

The advertising model for traditional, linear television is actually pretty simple. Networks air TV shows, and those shows have regular commercial breaks. In total, they typically end up being around eight minutes of commercials every half hour, and 16 minutes in an hour.

Now, as consumer viewing shifts to over-the-top video — a format dominated by the ad-free giant Netflix, and the limited-ad giant YouTube — companies are realizing that those old ad models just won’t fly.

“It is clear to us that consumers are not going to stand for 16 minutes of ads per hour,” Scott Rosenberg, the GM of Roku’s platform business, said at the Business Insider Ignition conference last week. “The consumer we are serving is highly empowered, they have lots of screens to choose from — ad-free experiences to choose from. While they value free, there is a tolerance. It is very clear that ad loads will come down, and the ads will have to become smarter and more engaging.”

So what can companies do? Better targeting and more relevant ads are a start, but so are ads that are not interruptive to the viewing experience. Roku will be adding search-based and discovery-based ads in the coming months, and is looking at other formats as well.

Other companies, such as Hulu and AT&T, are looking into other options, including “pause-vertising,” in which an ad would begin to play after a user presses pause on a show they are watching.

The logic is that as consumers increasingly binge-watch shows, they are increasingly pausing the action to grab a drink or use the bathroom. That could present an opportunity for certain advertisers.

While some consumers may be annoyed by these types of ads, they are certainly less interruptive than traditional commercial breaks, and are part of the value exchange of ad-supported OTT.

“Ad-free is a great product, if you can afford that type of viewing experience, it gives you back some time,” said Hulu CEO Randy Freer at the Business Insider event. “What we really like is that we can offer choice. We can offer a $0.99 package, or our Spotify bundle to consumers, and that is ad-supported, they understand that, and it has less than half of the commercial time than you have in traditional markets.”

Value is the key word here. Rosenberg says that consumers clearly want free ad-supported options to complement their paid subscriptions, and that “free” is the most-searched for term among Roku apps.

“I think many of us in the industry have been trying to figure out what the balance of ad-supported and ad-free viewing will be five years from now,” Rosenberg says. “It is very clear to us now at Roku that consumers are cutting and shaving the cord, not just because they are looking for more choices, but because they want value, so free is a really important selection criteria as consumers get into OTT.”

read more here: www.mediapost.com

About 50% of Hulu subscribers take $11.99 limited-ads option

A significant number of Hulu’s more than 20 million subscribers are paying for the more expensive limited-commercials option.

That’s according to Fox CEO James Murdoch, who told Recode that about 50% of Hulu subscribers are willing to pay $11.99 per month to cut down on ads popping up during streams. Fox—along with NBCUniversal, Disney and Time Warner—is a part owner of Hulu.

Recode later updated its story to cite insiders who say that more than 60% of Hulu subscribers still take the less expensive, ad-supported tier.

Earlier this month, Hulu revealed that it now has more than 20 million subscribers, but the service has yet to reveal how many of its subscribers are opting for the $40-per-month live-TV service.

Hulu also said it has grown total engagement by more than 60% and that 78% of viewing on the service takes place in the living room on connected TVs.

“Hulu is the complete TV experience for consumers, offering both live and on-demand programming and more consumer choice than ever before,” said Hulu CEO Randy Freer in a statement. “We are the only place that delivers award-winning content, ad loads less than half that of traditional television, with ads that are always viewable and always in a brand-safe environment—and we are leading the TV and advertising industries into the future.”

The strong uptake for Hulu’s more expensive tier with limited commercials is similar to the numbers CBS has been able to put up for its All Access streaming service.

Earlier this month, CBS said about one-third of its 2.5 million All Access subscribers are opting for the $9.99-per-month ad-free tier of the service.

Joe Ianniello, chief operating officer at CBS, said the fact that consumers are willing to pay more for a premium channel experience with CBS shows gives the company some added leverage when negotiating things like carriage and distribution.

read more here: fiercecable.com