It wasn’t long ago that streaming TV came with a promise: Sign up and commercials will be a thing of the past.
Netflix achieved streaming dominance in part by attracting customers to an ad-free experience. Amazon Prime Video, Disney+ and HBO Max have followed suit.
Well, that didn’t last long.
Ads are becoming increasingly difficult to avoid on streaming services. In turn, Netflix, Disney+, Peacock, Paramount+ and Max added 30- and 60-second ads in exchange for a slightly lower subscription price. Amazon has ads enabled by default. And live sports on these services include built-in commercial breaks, no matter how much you pay.
The importance of advertising was highlighted this month when Amazon and Netflix both held their first in-person presentations at “upfronts,” a decades-old televised event in New York where media companies attempt to woo advertisers.
Netflix dispatched Shonda Rhimes, the hit executive producer of “Bridgerton” and creator of “Grey’s Anatomy,” to talk to marketers about the service. Amazon packed its event with celebrities like Reese Witherspoon and Jake Gyllenhaal, as well as a live performance from Alicia Keys.
“Remember when the streamers told you, ‘We’re going to make TV in a new way, so I’m afraid we don’t need your little ads anymore,'” said Seth Meyers, l host of “Late Night”, to the announcers of one of this month’s events. “A few years later, every episode of “Shogun” is interrupted by “Whopper, Whopper, Double Whopper!” »
Or as one frustrated consumer put it on social media last week: “Why am I paying for Prime Video and getting all these ads? This is starting to get boring.
Representatives for Netflix and Amazon declined to comment.
Perhaps the change in visual experience was inevitable. Over the past decade, as media companies rushed to introduce streaming services to compete with Netflix, they prioritized subscriber numbers above all else.
There was only one problem: profits.
Companies bled money and Wall Street soured on their deals. The leaders are therefore going back. They order older network content at lower cost, like medical dramas, legal shows and sitcoms. They offer bundled plans so consumers are less tempted to click the cancel button. (Disney+, Hulu and Max will team up later this year, for example.) And they’re embracing ads as a way to increase revenue.
“The crazy thing is, we might end up where we are at ‘Texaco Presents,'” said Chuck Lorre, the hit comedy director behind shows like “Young Sheldon,” “Two and a Half Men” and “The Big Bang Theory”. .” “I’m old enough to remember Fred and Barney smoking cigarettes in ‘The Flintstones’ because the show was paid for by a tobacco company.”
Consumers can still avoid most ads, for a price. Most streaming services still have an ad-free version, including Amazon, which requires subscribers to pay an extra $3 per month to skip ads. Apple TV+ continues to offer only an ad-free experience.
However, commercial levels are becoming more and more essential to their business. There were at least 93 million ad-supported streaming subscriptions in the United States at the end of last year, according to estimates by Brian Wieser, an industry analyst, and Antenna, a research firm on subscriptions. As a result of Amazon’s automatic shift to advertising and an increase in the number of advertising customers taken over by other streaming services, Mr. Wieser and Antenna estimate that there are now at least 170 million funded subscriptions through advertising.
In the first three months of 2024, according to Antenna, 56% of new subscribers to a streaming service chose the cheapest ad tier. This figure is up from 39 percent recorded a year earlier, the company said.
Executives have tried to assure subscribers that even though advertising is back, it won’t be as overwhelming as on traditional television.
Just a few years ago, an episode of a prestige staple television series like Ryan Murphy’s “American Crime Story” was interrupted by 21 minutes of commercials. But ads take up much less time on streaming services. For example, on Disney+, the average ad length is four minutes per hour. On Hulu, it’s just over six minutes long.
“There’s always been this idea that people don’t like commercials,” said Rita Ferro, president of advertising sales at Disney. “I don’t think that’s true. People don’t like bad advertising or a bad advertising experience.
In a data-rich streaming world, she argued, the ad experience is better informed than it was on traditional TV, and the company knows what a person’s viewing preferences are and “which products are relevant to you,” she said.
Mr. Wieser, an analyst and founder of the consulting firm Madison and Wall, said he expected that even with ads running on streaming services, overall ad revenue would continue to decline for media companies. It predicts that time spent watching ads on TV – both streaming and on traditional and cable networks – will decrease by 24% by 2027 compared to last year.
Part of the reason, he said, is that many people will continue to pay extra to avoid ads on services like Netflix. “The vast majority of Netflix subscribers will never choose an ad-supported option, regardless of the price,” he said.
Yet in some cases, viewers have no choice. Even Netflix subscribers who pay more than $15 per month for the ad-free tier will be exposed to ads if they tune in to the streamer’s two NFL Christmas games this year, or WWE shows next year . The same goes for subscribers of Peacock, Paramount+ and Prime Video, which also stream live sports.
“Amazon sells the NFL. How is this different from what Fox sells or what CBS sells? said Joe Marchese, former head of advertising sales at Fox Networks Group, now a venture capitalist. “Netflix has a Shonda Rhimes show. What you offer to advertisers: here is cultural creation, would you like to be adjacent to it? It looks exactly the same. The only difference is who does it.
And in some cases, a half-century precedent is earth-shattering.
For decades, HBO offered no advertising. But now advertisers can run ads on Max’s ad tier during episodes of old HBO fare and an ad before a new HBO series. During the company’s initial presentation to advertisers, executives played a clip of a commercial for a GMC Sierra pickup truck that aired on Max’s ad tier before episodes of HBO’s “True Detective.”
It was particularly striking to see Casey Bloys, HBO president and two-decade veteran of the network, more accustomed to developing storylines than pitching marketers, promoting programming “that reaches multiple audiences” from the start. While discussing statistics about the audience composition of the HBO documentary series “Hard Knocks,” Mr. Bloys stumbled over his words, laughed and said, “I’m new to advertising jokes. »
At Disney’s upfront event, ABC late-night host Jimmy Kimmel mocked media companies for suddenly returning to their roots, including bundling different streaming services into one package. Viewers “can turn on their TV and get all the channels in one package for one price, all supported by advertisements,” he said. “We call it basic cable, and it will blow your mind.”
And then Mr. Kimmel took aim at Netflix, reminding marketers that they “spent years ignoring you, making fun of you.”
“Remember when Netflix thought they were above all that? he said. “They came, they destroyed commercial television. And now guess what they want to sell you. Advertising. On the television.”
