Alex Hole
May 3, 2022

Netflix has the opportunity to deliver a superb AVOD experience

The platforms that best execute the introduction of ads while bearing the needs and experience of the end user in mind will find the greatest success, says VP at Samsung Ads.

Netflix has the opportunity to deliver a superb AVOD experience

Only a month ago Netflix was celebrating a decade since its UK launch and reflecting on its role in transforming the TV landscape and how audiences now expect to enjoy content. But now it's bracing for a new era of change as financially-pressured households reconsider subscriptions to multiple streaming services.

In its recent financial results update Netflix revealed it had lost subscribers for the first time in more than a decade. And while many commentators have been quick to declare the impending doom for the streaming giant, I’d argue that there is still great potential for Netflix to retain a leadership position in the next inevitable evolution of TV - if it fully embraces these new opportunities that are emerging.

In today’s TV landscape where economically-squeezed subscribers are navigating between a proliferation of subscription services, it’s encouraging to see a willingness from Netflix to reconsider the bold words of co-founder Reed Hastings, who claimed back in 2015 that “No advertising (was) coming onto Netflix. Period."

Now, according to reports, Netflix is reviewing an AVOD strategy and if it can execute its advertising proposition successfully, it could further transform the streaming marketplace into the next decade.

Sustaining subscriber growth is a revenue challenge for all subscription services. Recent research from Kantar indicates that in the first quarter of this year a total of 1.51 million subscriptions to SVOD services were cancelled, with cost being the reason for more than half of cancellations.

According to reports, we are already beginning to see other SVOD services respond; Disney+ has revealed its intention to introduce a tiered offering, including an ad-supported model, later this year.

I’m sure the irony has not escaped many in the broadcasting industry that the very disruptors who challenged the traditional model of TV funding to remove the reliance on advertising are now exploring additional commercial strategies that may include advertising.

But don’t be fooled - the TV ecosystem isn’t going backwards. The concept of subscriptions and ad-free viewing didn't revolutionise TV.

The revolution that has dominated the last decade was the delivery of an empowering and exciting user experience that granted the viewer ultimate control over when and how they watched their favourite content.

What grabbed the viewer’s imagination and attention when Netflix launched was not the lack of ads; it was binge-watching, it was choosing shows and films to our own schedule and it was the extensive catalogue of high-quality programming.

Viewers won’t want to lose these features and the majority will likely accept advertising as the trade-off.

Research by Ipsos on behalf of Samsung Ads conducted at the end of 2021 showed that 56% of Smart TV viewers across Europe were willing to view ads in exchange for free content.

The current economic situation means that the one-size fits all subscription format is no longer sufficient in keeping the masses engaged. To keep OTT content growing in popularity, it’s the right time for streaming giants to diversify how consumers access their content.

An exciting prospect for advertisers
The possibility of Netflix and Disney+ - the two biggest streaming services in the world with a collective subscriber base of 350 million - introducing ads is obviously very exciting for advertisers.

The dominance of ad-free streaming has been tricky for brands to navigate during the last decade.

The platforms that best execute the introduction of ads while bearing the needs and experience of the end user in mind will find the greatest success.

That means, among other things, making sure viewers see relevant ads and that the frequency is carefully managed. There is lots to learn from the current AVOD market.

From our own ad-funded service Samsung TV Plus we’ve been able to understand some of the motivations for audiences making use of the platform, which include the fact it is completely free, ease of use, and the amount of channels available.

For publishers, the introduction of ads is an equally exciting prospect. This revenue channel means they can make their content accessible to all and not just those that can afford the price of a subscription. A growing number of engaged viewers will attract more and more ad bookings.

If Netflix jumps into AVOD we will be facing a shift in the TV landscape. The upside for advertisers, publishers and audiences alike is enormous. It will ease the pressure on wallets so households have more disposable income and advertisers will be able to reach engaged viewers on the biggest screen in the home.

But if the value of AVOD is to be realised Netflix needs to meet the high standards it set for streaming and deliver a seamless and personal digital experience for the viewer.

Alex Hole is vice president of Samsung Ads Europe

Campaign UK

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