The entertainment industry has witnessed massive changes in recent years with the emergence of streaming platforms. While many video streaming services followed the SVOD (Subscription Video On Demand) model, a few have pioneered the AVOD (Advertising Video On Demand) model. In this article, we explore the rise of AVOD services and understand its broader impact.
Origin and Growth of AVOD Platforms
Some of the early AVOD services include Crackle, IMDB Freedive, and Tubi. These platforms offered free access to a large library of movies and shows in exchange for watching advertising during playback. This model was seen as an affordable alternative to paid subscription services.
Crackle, launched in 2006, was one of the pioneering AVOD services. It grew its content library through partnerships with major Hollywood studios. Its simple free experience made it popular among cord cutters looking for options beyond cable TV.
Tubi, which debuted in 2014, followed a similar model and licensed a broad selection of films and shows from various rights owners. Within a few years, it emerged as one of the largest AVOD platforms in the US with over 23,000 titles available. Its growth indicated the masses’ willingness to watch ads in exchange for free entertainment.
Rise in Popularity
As the streaming revolution accelerated, major media companies also sensed an opportunity in the free and ad-supported business model. In 2019, Fox Corporation rebranded its SVOD service FX+ as Tubi and ramped up investments.
Later that year, NBCUniversal launched Peacock with three subscription tiers, including a free version supported by advertisements. Disney too announced plans for an AVOD service called Disney+ under its Hulu brand.
The growing popularity of these free, ad-supported streaming platforms coincided with the cord-cutting trend. More people cut or reduced pay-TV packages to save costs. AVOD emerged as a popular alternative that provided entertainment similar to linear TV and cable but without subscription fees.
Content Investment and Viewership Growth
To retain and expand their viewer base, AVOD services upped investments in original and exclusive content. For example, Tubi ramped up investments to produce over 50 original movies and series annually. This helped expand its content library and attract new users.
Peacock too committed to developing original programs and snagged popular titles like The Office from competitors to bolster its free tier. As major studios released their films on these platforms after theatrical runs, it enhanced the value proposition for viewers.
As a result of increased investments, viewership on AVOD platforms surged. According to data, Tubi reached an all-time high of 33 million monthly active users in 2021. Peacock witnessed 10 million monthly active accounts on its free tier. With higher engagement, these platforms were also able to charge premium ad rates, a rare feat for free streaming services.
Rise of Targeted Advertising
With direct access to viewing data, AVOD platforms emerged as an attractive avenue for targeted advertising. Their ability to understand audience segments helped advertisers optimize campaigns and assess return on investment better than traditional TV.
Tubi partnered with data companies like Nielsen and invested in first-party data solutions. This enabled it to offer customized and niche ad inventory based on viewership patterns. Similarly, Peacock adopted new ad formats and measurement tools that blended digital and TV metrics for sponsors.
The availability of such hyper-targeted options at affordable prices sparked brands’ interest in AVOD platforms. Many shifted portions of their TV ad budgets toward connected TV opportunities on these services. This fueled further growth and boosted revenues for AVOD networks.
Impact and Future Outlook
The unprecedented success of AVOD services indicates consumers’ willingness to trade privacy for free entertainment if the experience is simplified. It helped extend the reach of television and demonstrated the potential of ad-supported consumption in the digital era.
For content owners grappling with cord-cutting, AVOD networks emerged as a reliable secondary revenue channel after theatrical and home entertainment windows. Major media companies have stressed increasing availability of content on free streaming platforms to offset losses from pay-TV declines.
As AVOD services viewership grows exponentially, these services will continue enhancing targeting capabilities, experimenting with new ad formats and supplementing traditional ads with other revenue streams like e-commerce and sponsorships. Industry estimates expect the AVOD market to cross $30 billion in revenues by 2025 in the US alone. With its strong value proposition, AVOD may well reshape the entertainment ecosystem in the coming years.
*Note:
- Source: Coherent Market Insights, Public sources, Desk research
- We have leveraged AI tools to mine information and compile it
