In its annual TMT Predictions, Deloitte Global predicts that by the end of 2023 almost two-thirds of consumers in developed countries will use at least one advertising video-on-demand service monthly. By then, all major subscription video-on-demand services in developed markets will have launched an ad-funded tier to complement ad-free options. By the end of the following year, half of these providers will also have launched a free ad-supported streaming television service. Deloitte expects that by 2030 most online video service subscriptions will be partially or wholly ad-funded.
These services will join existing advertising-funded online video services from broadcasters in most markets that have existed for over a decade. By 2030, they will have been established for 20 years.
Many online video subscription services initially offered an advertising free experience as a distinct benefit. The expectation was that viewers would never go back once they had become used to viewing without interruptive advertising.
However, the proliferation of streaming services and increasing cost of subscription fees has made this harder for many households to afford, even among consumers in the wealthiest countries.
Deloitte suggests that viewers will trade adverts for more affordable access to programming. It polled consumers in multiple markets and found that most consumers would choose an advertising supported subscription tier, either at half price for six minutes of adverts an hour or free for twelve minutes of advertising an hour.
Nevertheless, around four out of ten people polled in the United States and the United Kingdom said they would rather pay the equivalent of $12 a month not to have any advertising.
Conversely, around six out of ten people in those countries already watch online video services supported by advertising. Most media, including broadcast television, has advertising, so Deloitte suggests that introducing advertising to online video is an evolution rather than a revolution.
For traditional broadcasters, Deloitte observes, online advertising offers an additional source of revenue, drawn from online advertising budgets. It suggests that this addresses pent-up demand from advertisers who highly value delivery to a large television screen. The suggestion is that this, together with targeting, will sustain a premium price for advertising.
That is the theory, at least. Deloitte does not address the concern that to match the decline in traditional television viewing, national broadcasters will need to derive considerable revenue from their online offerings, in competition with global players providing premium programming.
Meanwhile, Deloitte seems to suggest that native online services will need to adopt some of the practices of broadcasters, from creating breaks for advertising and releasing programming episodically, to creating similar advertising sales organisations. To which one might add promoting programmes more creatively. In other words, become more like traditional television.
All of which suggests that traditional media players might be better placed than those that are entering the advertising business for the first time.
The data on subscriber preferences for advertising are from Deloitte Insights Digital Media Trends, 16th edition and date from March 2022.