Cable 2.0: Netflix and other streamers bring ads back after disrupting the TV landscape

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TORONTO-

Canadian Netflix users will see a new membership option starting Tuesday that costs less but comes with a drawback: commercial breaks inserted into your favorite shows.

After years of non-stop binge watching, the world’s largest streaming service is giving way to a few words from its backers. And as inflation continues to bite consumers, the proposition of a cheaper Netflix plan may sound tempting to some.

Netflix isn’t alone in believing that commercial TV is back in a big way.

Several free, ad-supported streaming services will launch in Canada in the coming weeks, all based on a business model that leverages the country’s multibillion-dollar advertising industry to finance and acquire programming.

Analysts say that together, the platforms could reshape the way we watch and pay for TV. More viewers are complaining that streaming costs have ballooned to near the level of their old cable bills, putting pressure on each service to rethink its business model.

“Consumers are faced with more choice, more platforms and are making more deliberate decisions about which streaming services to keep and which to cancel,” said Justin Krieger, senior technology and media analyst at consultancy RSM Canada.

Of the newcomers, Pluto TV debuts on December 1st with over 100 channels of free TV series, movies and sports streaming “live” online on a platform that mimics the channel-surfing experience, complete with the commercials.

Around the same time, CBC introduces a revamped free streaming news channel that will be available on the CBC Gem and many other streaming platforms. A flagship show hosted by Andrew Chang of “The National” will be the main attraction with announcements interspersed throughout the day.

South of the border, Disney Plus launches an ad-supported option later this year, and some industry watchers predict it will apply the same model to Canada soon after. The level of ads will be introduced at the price of Disney’s existing commercial-free service. Subscribers who want to remove the ads will have to pay a premium.

Each service has its own reasons for getting into the advertising business.

For Netflix and Disney, one of the main drivers is rising revenue as programming costs soar and competitors lure subscribers.

Meanwhile, free streaming services use ad revenue to fund a slate of licensed and original programming, putting incredible pressure on Netflix to maintain its leadership position with compelling new movies and shows.

NETFLIX PRESENTATION

Earlier this year, after repeatedly ruling out the possibility of dabbling in advertising, Netflix changed its tune by announcing that it would launch a tier of advertising for subscribers in key international markets.

In Canada, the “basic with ads” plan costs $5.99 per month, less than the ad-free plans, which start at $9.99 and top out at $20.99 per month.

As compensation for the savings, Netflix says subscribers will be presented with an average of four to five minutes of ads per hour played before and during their TV shows and movies.

Video quality on the Netflix ad plan maxes out at 720p, leaving full HD streaming at 1080p and 4K for premium subscribers. Viewers will also not be able to download titles to their devices and not everything in the service’s library will be available.

Those restrictions will sour the appeal of many Netflix devotees, suggested Carmi Levy, a technology analyst based in London, Ontario.

He said Canadians were sold on the idea of ​​a commercial-free Netflix a decade ago, prompting other market participants to follow suit with similar models.

That’s unlike the US, where Peacock, Paramount Plus and HBO Max offer less expensive ad tiers as a subscription option, while Amazon’s Crackle and Freevee are among the biggest players on free, ad-supported platforms.

“Canadians don’t have that legacy of experience, and as a result, they may be more resistant to the way Netflix is ​​introducing that service,” he said.

“It will take time for Netflix and others to educate Canadians about the advantages of paying less for a streaming service and getting ads in return.”

DO CANADIANS WANT ADVERTISEMENTS?

Kaan Yigit, a technology analyst at Solutions Research Group, said a survey by his firm earlier this year found that US viewers have already embraced ad-supported subscription options.

About 40 percent of HBO Max subscribers signed up for its lowest-priced ad tier, he said, while an average of 58 percent of subscribers used the cheaper versions of Paramount Plus and Peacock.

He estimates that a modest 20 percent of Canadian Netflix subscribers will join the ad tier over the next 12 to 18 months.

However, Netflix’s initial check-in numbers won’t be the best indicator of long-term success for the advertising model, Levy suggested.

Subscribers who joined a deal could be cut off if ad breaks drag on as long as they do on network TV stations, which typically air 20 minutes of commercials an hour.

“The devil is always in the details whenever a streaming provider comes up with an ad-based tier,” Levy said.

“What matters most is how intrusive the presentation of the ads is to the overall viewing experience. And if it’s intrusive in the way that consumers have long complained about traditional TV ads, then this might not be the case.” a good start for Netflix.” “

ADVERTISING AGENCIES

Until those complexities are worked out, ad agencies say their clients are salivating at the prospect of new placement options in the Canadian market.

“What we’re seeing is a lot of initial excitement and questions about Netflix, in particular,” said Marissa Cristiano, account director for Cossette, who says she is “exploring” buying ads on the service with some clients.

“They’ve done a really good job of creating…the kind of content that brands really want to partner with.”

Cherie Hill, senior vice president of media at marketing firm Society, Etc., said she anticipates Netflix ads will be geared toward “budget-conscious” shoppers, with a strong focus on consumer staples, home goods and automotive companies.

She doesn’t anticipate much pushback from viewers, mainly because Netflix is ​​making it an optional proposition.

“If you choose to have the commercials, you won’t leave a negative experience,” he said.

“They’re providing a choice and they’re managing expectations.”

This report from The Canadian Press was first published on October 30, 2022.

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