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It’s a tough time for commercials, and the networks airing them, with viewers of streaming networks increasingly getting used to watching their favorite programming commercial-free on the likes of Netflix and Amazon and Hulu. But for the ad-supported streaming platforms out there, such as Crackle, Tubi TV and Pluto TV, their executives say that business model can flourish — if it’s handled correctly.
“People are comfortable with [ads] if we respect their time and if they get premium content,” Eric Berger, executive VP of digital at Sony Pictures Television and general manager at Crackle, said. “If they’re comfortable with both of those things, they’ll watch.”
Other players in the AVOD (advertising video-on-demand) space include Vudu, the Walmart-owned electronic retailer that has some free-with-ads movies and TV shows; PEN, the People and Entertainment Weekly video network from Time Inc.; and Popcornflix.
Those running ad-supported streaming networks are quick to point out that the commercial-free competition costs the user money. Netflix’s products cost from $7.99 to $11.99 per month, with the standard product priced at $9.99. Hulu costs $7.99 a month for “limited commercials” and $11.99 for “no commercials.” Amazon Prime is $99 a year. Ad-supported networks are typically free for the user.
‘Cost-Conscious America’
A free service remains popular with a sizable chunk of the population, Farhad Massoudi, CEO of Tubi TV, said. “Consumers are cost-conscious — it’s cost-conscious America,” he said. “Those are the ones that don’t want to pay more for TV.”
Massoudi noted how the various subscription services need “the shiny new TV show” in order to stay relevant with their customers. Tubi, he said, is all about daily consumption for “the average American.” Tubi talks up its library’s “modern classics and cult favorite TV shows and movies” on its website’s homepage. Massoudi said the more popular offerings include Freaks and Geeks and Fear Factor, among TV series, and Gladiator and Silence of the Lambs, among films. A month ago, the company announced a $20 million round of funding that will help build up the library.
Several executives with AVOD platforms said their sites must work advertising in carefully to not take away from the viewer experience. Crackle’s Break Free ad initiative offers the user five commercials per show, either 15 or 30 seconds long, from a lone advertiser. Crackle’s total ad time is around half of that of linear TV, Berger said. But even that reduced ad load can sometimes be too much in the current TV era.
“An ad load that is half of TV’s is still challenging when you’re bingeing a series,” he said.
With Break Free, users’ brand recall for advertisers is seven times that of linear TV, Berger added.
Massoudi said Tubi, which launched in 2014, has been “pretty much” sold out in terms of advertising for about nine months now. “We’re monetizing our inventory very well,” he said.
Increasingly relevant ads are also key to the advertising experience going down easier with the user. Tom Ryan, CEO of Pluto TV, said the platform, which has 6 million monthly active users, is in the “early phases” of personalizing the stream of ads served up to a user, based on their viewing preferences. “The online media landscape is very much an ad-driven business,” he said. “It’s essential that ads are as relevant as possible to the user, and that the ad load is appropriately sized.”
The Pluto TV ad load is around half that of traditional television, said Ryan, around eight to 10 minutes per hour.
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AVOD executives say their platforms offer marketers access to nontraditional viewers that are giving up on linear TV. With traditional TV ratings down, it makes the AVOD players more essential, they said. “I believe advertisers increasingly want to be in front of millennial users, who consume TV on any number of devices, not just traditional TV,” Ryan said.
Scale Fail
Brian Wieser, senior analyst at Pivotal Research Group, said the ad-supported platforms are mostly small entities that don’t have a whole lot of hope of scaling up to a major force. “This kind of business needs to go big, or they should probably go home,” he said.
Library content, he added, is often a commodity among the streaming services. “If the libraries are not specialized,” he said, “you’ve just got tonnage.”
Pluto TV’s Ryan counters that the channel’s “curated” strategy, which sees Pluto’s editorial team go through its massive library and pick content to group into channels dedicated to standup comedy, classic cartoons, news and other topics of interest, makes for a superior user experience. “People may not have a channel like we offer on their pay TV service,” he said.
Be Original!
As Amazon, Hulu and Netflix, not to mention numerous cable channels, well know, original programming is a clear-cut way to set a network apart. Crackle has gone down that road, with series such as The Art of More, Snatch and StartUp wholly original to the platform. That sets it apart among most of the competition. “I’m not seeing a lot of them doing that at the quality level we are doing,” Berger said. “It’s what we do as a company.”
Crackle is part of Sony Pictures Television Networks, where creating shows is indeed part of the DNA. (Sony also Berger calls the originals strategy “a big part of our branding and customer acquisition and retention.”) Original series get high CPMs, he said, and open up the opportunity for branded integration.
Of course, producing original series is expensive, and hardly a guarantee that viewers will tune in.
PEN’s originals include the People feature Hollywood at Home and a celebrity interview series hosted by People/Entertainment Weekly editorial director Jess Cagle. The network also runs documentary films from its corporate siblings, such as Time and Sports Illustrated. The show Bingeworthy, meanwhile, offers up suggestions on what to watch on TV, with Jessica Shaw and former MSNBC personality Touré hosting. “It’s today’s version of Siskel & Ebert,” Time Inc. senior VP of strategy and business development Bruce Gersh said.
Pluto TV offers unique channels from The Onion and CNET, among others, and its “What’s On” channel shows a host going over programming highlights.
Wieser said standout originals have helped Netflix and Amazon grow into major entertainment outlets. “If [ad-supported streaming networks] are not going to do what those ones do, they’re probably just going to be a blip,” he said.
It’s a game plan that Crackle believes in, and Berger believes the network’s originals are key to making Crackle stand out in an increasingly packed video viewing landscape.
“I’m a very strong believer that, if you have a powerful, free offering,” Berger said, “consumers will make it part of their personal bundle.”
