By Sean Doherty, CEO of WURL
Streaming video is having a moment. While viewers and ad dollars continue to rise for the medium, the streaming industry isn’t without headwinds. Streaming subscription churn has risen to unsustainable levels; streamers are reconsidering their multi-billion dollar content budgets and enormous service costs; and platforms, like Netflix, are struggling to understand how subscriptions and advertising business models can co-exist.
In more ways than one, the industry is reeling. Yet, as in any time of upheaval and uncertainty, there are opportunities.
CTV is to 2023 what mobile was to 2008
During the 2008 financial crisis, the advertising industry experienced a steep downturn. Every entertainment medium saw declines in ad revenue with one exception: mobile. At that time, smartphones had just hit the market and unit sales were extraordinary; records were being made and broken each month. In 2009 alone, 172 million smartphones were estimated to have sold, up 24% from the year prior.
Buoyed by smartphone adoption, mobile advertising volume rose sharply while every other segment of advertising declined steeply. In short, the adoption of the new technology outpaced the impact of the recession, making it a net positive for that one segment of the ad industry.
This year, in 2023, we’ll see the sequel to the 2008 story but this time with CTV in the lead role outpacing the economy’s drag. The growth in connected TV device sales and streaming adoption will deliver a tailwind to CTV advertising that is likely to more than make up for the advertising price pressure that will come from a continuing economic downturn.
Entertainment is “recession resistant”
In a down economic cycle, consumers cut back in any number of ways: buying fewer groceries, opting for generic brands, cutting out vacations and generally working to save more money and spend less of it. But, as consumers save by spending more time at home, they inevitably turn to our number one pastime: TV. For decades, ad-supported TV has not just survived but thrived during bad economies.
Perfectly timed to absorb our increased home-time, Hulu, Netflix and others are now offering less expensive ad-supported tiers, providing more consumers with access to their programming and giving brands the opportunity to reach more consumers on CTV.
Increased time at home coupled with more streaming viewing will create a flywheel attracting a greater number of media buyers who will shift larger amounts of ad dollars to CTV. Those to come out on top will be the brands and agencies who recognize that CTVs are our most-looked-at screens.
FAST gains share
Just a few years ago, only a small group of TV makers had launched free ad-supported TV (FAST) channels. Now, practically every major TV manufacturer, connected device maker and streaming app includes FAST channels. Every top smart TV maker has deeply integrated FAST channels with the television hardware – no box or HDMI plug-in needed – a signal that FAST is here to stay.
For viewers, FAST channels offer a simpler user experience and fewer choices to make since they are free and bundled with most TV devices. For content companies, FAST provides an easy way to expand into global markets and engage entirely new audiences around the world, creating net-new revenue streams as a result. In 2023, FAST is expected to generate $4.5 billion in the United States, reaching $6.1 billion by 2025.
Despite real challenges in 2023, the streaming industry appears well-positioned to grow and thrive thanks to the steady rise of connected TV devices, our migration of increased viewing time to streaming and the promising growth of FAST. With more consumers flocking to the connected TV screen, the opportunity has never been greater for content companies, streamers and advertisers to reach and retain new audiences.