Why some streaming companies are leaning into adverts and raising prices

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By todaybreakingnews.org

When streaming services initially hit the market, part of their allure was eliminating the advert experience. Many consumers ditched linear television so they could watch programmes uninterrupted, subscribing to services including Netflix. It revolutionised the media business landscape – and gave consumers a totally new, on-demand experience. 

Now, however, eager to boost revenue, streaming companies are pumping adverts into their products. In late September, for example, Amazon announced it’d be integrating ads into its Prime Video service in at least 10 global markets come 2024, joining many other streamers who’ve already made the move. 

Streaming consumers will be back to square one – stuck with the commercial breaks they were eager to jettison, and likely subscribed to multiple streaming outlets at collective prices that rival cable TV packages.

This shift comes as many streaming services are facing massive amounts of debt, says Anthony Palomba, a professor at University of Virginia Darden School of Business, US. This is due to the cost of content investments, licensing fees and other expenditures these companies have made to expand their libraries and compete with other services on the market. Now, they are looking for a return on those investments – and subscribers will foot the bill. . 

NBCUniversal’s Peacock, for instance, gained 4 million subscribers in the past quarter, bringing the total base to 28 million subscribers, an 80% year-over-year increase. The subscriber growth came even as the company began charging for the (formerly free) ad-supported tier, and raised prices on ad-free options.

Other streamers are leaning into ad-supported models and higher subscription pricing as well. Hulu and Disney Plus raised prices on their ad-free options, while keeping the cost of the comparatively lucrative ad-based tiers steady. Disney+ is introducing an ad-supported option, and also raising the price of its ad-free tier. Meanwhile, Netflix, too – a pioneer of streaming services – has introduced ads for the first time in many countries across the globe.

This approach marks a big change for these companies, who are making these moves to shift their original business models, says Dave Simon, head of growth initiatives at Moloco, a US-based machine-learning-based advertising company. “Most of the large content companies saw an opportunity to go direct-to-consumer, as opposed to going through their typical distribution points, the cable operators,” he says. “They all took a swing at building a business with subscription being the core revenue driver.”

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