2022 will stand out as the year that AVOD took center stage.
Ad-supported video viewership growth surpassed subscription-only streaming and overall streaming viewership overtook cable for the first time.
But the most unexpected streaming news this year came when Netflix announced plans to launch an ad-supported tier – and Netflix wasn’t the only streaming platform to do so.
Disney+ went AVOD in early December, HBO Max is introducing ads into its previously ad-free originals and Warner Bros. Discovery decided to rush the release of its combined Discovery+ and HBO Max streaming service next year.
After streaming consumption exploded during the pandemic, platforms are hoping ads will keep their subscription costs competitive and stop subscribers from churning.
Advertising, tudum
Before this year, Netflix claimed to have no interest in ad sales, let alone ad tech.
But as surprising as Netflix’s 180-degree turn into advertising was, its choice of Microsoft as its ad tech partner was even more surprising to some.
Microsoft’s Xandr is relatively new to the TV business and doesn’t have the broadband household reach that Google or Comcast has. Industry insiders were doubtful of Microsoft’s ability to handle the assignment.
But Netflix has its reasons for selecting Xandr, including a desire to maintain as much control over its inventory as possible.
Netflix has a lot of work to do, though. To start, Netflix is only offering ad targeting based on genre and content category for now, and already had to offer refunds to advertisers after certain of its impression guarantees fell short.
Guess the honeymoon phase is over already.
Sprinkling fairy dust
Disney, however, is hoping to woo advertisers with more granular ad targeting.
In a clear dig at Netflix, during its most recent earnings call Disney touted its “proven technology and years of experience in ad tech relationships.”
To be fair, Disney+ is starting off with more advanced ad targeting than Netflix. Disney is offering audience targeting against three different age groups, including young children, which is contextual-only. That may sound like table-stakes for a streamer with so many children in its audience, but it’s more than what Netflix has.
But there’s another big different between what Disney and Netflix have to offer.
As opposed to Netflix, which launched its Basic with Ads tier at a low cost ($6.99 per month), Disney hiked up its prices this year.
Disney+ with ads costs $7.99 per month, which was the price of the original Disney+ without ads. Ad-free Disney+ subscriptions are now $10.99 a month, which means subscribers have to spend an additional $3 per month if they want to avoid ads. Disney’s also planning additional price increases in 2023 for its streaming bundle, which includes ESPN+ and Hulu.
Disney likely chose to raise prices because it’s been losing a ton of money on content production, not to mention linear networks. Disney just reported peak operating losses in its most recent quarterly report, and plans to make up for it in part by charging consumers more for its content.
What’s up with Warner Bros. Discovery?
Warner Bros. Discovery had quite a rough year, too.
WarnerMedia’s acquisition of Discovery closed in April, saddling the newly formed WBD with tens of billions in debt.
One of the first things that the combined company did was to abruptly shut down CNN+ just one month after it launched. Meanwhile, WBD has been falling short of investor expectations and struggling to keep subscriber counts up.
To save money, WBD slashed licensed content and original productions for HBO Max left and right in 2022, and HBO Max recently started planning ads to its originals for the first time, including the popular “Game of Thrones” spinoff “House of the Dragon.”
Despite great viewership numbers for “House of the Dragon,” David Zaslav, CEO of WBD (and former CEO of Discovery), told investors in November that he was surprised that the hit helped attract so many subscribers onto a platform that’s just “not that great,” referring to HBO Max.
According to Zaslav, the combined company needs to fix WarnerMedia’s mistakes. One step in that direction was WBD’s decision to combine Discovery+ and HBO Max into one streaming service called, simply, “Max.” (No “HBO” … ouch.)
The skewed treatment between HBO Max and Discovery+ sparked some online speculation online that WBD might axe HBO altogether.
But whatever HBO (sorry, Max) looks like next year, WBD is rushing the release of its combined AVOD streaming service from summer up to spring.
Although the streamers girded themselves for battle in 2022, expect 2023 to be the year we start seeing the real winners and losers.
