Streaming Services Increasing Ad-based Options While Upgrading Premium Subscriptions
Streaming companies argue that offering ad-based options is a budget-friendly way for users to enjoy their content while simultaneously increasing revenue from premium subscriptions. Apple TV is currently one of the few streaming platforms that does not feature third-party ads.
Amazon’s move to charge extra to remove ads has the potential to anger consumers. Mike Proulx, a research director at Forrester, comments, “They’re offering no additional value and simply forcing ads on consumers.” This decision is what led Millsap, the former Prime subscriber, to cancel his membership, as it felt like a broken promise and a change in terms.
Streaming Services Relying on Big-budget Hits and Subscription Charges
In addition to offering classic shows and reality content, streaming platforms must have a handful of high-budget hits to retain viewership. For example, the first season of HBO’s “House of the Dragon” cost under $20 million per episode to produce, while Amazon Prime’s “The Lord of the Rings: The Rings of Power” was estimated at $465 million for the first season alone.
To cover the costs associated with such productions, streaming companies are constantly adjusting subscription charges and making other changes. Netflix, for instance, started cracking down on account-sharing last May to convert some of the estimated 100 million unauthorized viewers into paying customers. However, except for Netflix, most major streaming platforms are still not profitable.
Challenges and Innovations in Streaming Advertising
The streaming ad industry is still young and must find ways to innovate. Some viewers express dissatisfaction with the quality and repetition of advertisements, which often remain unchanged from cable TV practices. As streaming platforms feature fewer ads, they tend to repeat the same ones, leading to random and jarring interruptions during movies. Industry experts expect the streaming ad industry to explore new avenues for innovation, such as incorporating still ads that appear when viewers pause a show.
Currently, Amazon Prime does not show ads on children’s profiles or on children’s content. Advertisers are increasingly resorting to outdated methods in hopes of boosting profits, rather than focusing on product and service innovations that drive demand. This sentiment is shared by Luis Kapel, who decided to keep their Amazon Prime membership and pay the additional $2.99 a month to avoid wasting time on ads. The couple canceled their cable subscription in 2016 due to the excessive volume of irrelevant advertisements.