The number of global subscriptions to online video services like Netflix and Amazon Prime has surpassed subscriptions to cable TV for the first time, according to a new report by the Motion Picture Association of America.
Worldwide, the streaming services added 131.2 million new subscribers in 2018 for a total of 613.3 million—a 27% increase over 2017 figures. In comparison, cable subscriptions fell 2% to 556 million. Yet, despite losing ground to streaming as a result of cord-cutting, cable still outpaces streaming in revenue, netting $118 billion in subscriptions vs. streaming’s $40 billion.
In the U.S., there was a smaller gap between streaming and cable, with 70% of households watching TV programming and movies via streaming services, vs. 80% watching through traditional pay TV methods. Because streaming households tend to subscribe to multiple service providers, that 70% actually represents a larger number of subscriptions than the 80% for pay TV.
For advertisers, this shift promises to further fragment an already fragmented media landscape. But savvy marketers know how to spin market complexities into advertising gold and here are a few points to keep in mind as they do so.
The Price Change Felt Round the Media Universe
Back in January, Netflix told its U.S. customers to expect a price increase in May in order for the company to continue its investments in content and enhanced services. Analysts have said that Netflix’s position as the most powerful media company today will help it absorb this particular price increase, but they also agree that ongoing price increases aren’t sustainable for the long term. With streaming services proliferating rapidly, viewers are finding it ever more necessary to subscribe to multiple services to get the content they want and their ability to pay more will soon be exhausted. Subscription fatigue is real and the industry is fast approaching the tipping point.
Growth in Ad-Supported Streaming
While there will always be a tier of customers who will pay any fee for ad-free content, the majority of viewers won’t be able to do so and that will translate into rapid growth of the entire ad-supported streaming niche. This opens up a world of possibilities to marketers, but it’s not one that should be approached without significant regard for consumers’ tolerance for advertising. Numerous studies have shown that consumers don’t mind ads as long as the content is relevant to them, the storyline creative and compelling and the video quality top-notch. As such, the onus will be on advertisers to religiously adhere to these preferences as they ramp up their presence on ad-supported streaming platforms in order to get the desired returns on their investments in creative.
New Views to New Ad Models
Finally, marketers should be on the lookout for new, innovative ways of getting their brand messaging in front of receptive consumers. Brands will need to evaluate their approach to streaming to understand what opportunities exist and what may resonate with their target audience. Recently, for example, brands have started establishing relationships with production houses to identify alternatives to traditional spots for programming that is commercial free. In this vein, Oreo leveraged a partnership with Netflix favorite “Stranger Things” to integrate one of its commercials from the ‘80s into the show’s content. And, according to AdExchanger, Kellogg and Eggo Waffles worked out social deals with the show to capitalize on one of the character’s obsession with breakfast foods.
These arrangements may not be considered traditional advertising, but that’s the point. New environments call for new approaches and marketers will be well-served by keeping open minds and embracing new formats going forward.