Report: AVOD Revenues to Double in Next Five Years; What Can TVOD Providers Do to Increase Traffic?
It’s no secret that there’s money to be had in ad-supported video-on-demand (AVOD) streaming. Thanks to the additions of ad-supported plans on Netflix and Disney+, almost every major streaming service on the market now offers an AVOD subscription tier.
That will translate into healthy revenue growth over the next five years, according to the British-based firm Digital TV Research. DTR has released a new report forecasting North American streaming growth over the next five years and it shows that while subscription video-on-demand (SVOD) revenues will only grow by $6 billion by 2028, AVOD revenues will more than double, expanding by $27 billion to a total of $43B.
It should come as no surprise that AVOD will gain so many viewers in the next five years. A recent report from TiVo showed that 64% of American customers now use at least one AVOD service. AVOD adoption will continue to rise thanks to its lower cost compared to premium ad-free streaming services, and the ways that it can mimic traditional pay TV; many AVOD services carry live free ad-supported TV (FAST) channels, complete with handy grid-style viewing guides.
The similarities between FAST and cable/satellite TV might be one of the big reasons so many consumers think of ad-supported streaming as a practical alternative to cable. A new report from Tubi shows that 75% of American media users now consider AVOD as a viable replacement for a pay-TV subscription. Not all AVOD services offer free channels; Paramount+, HBO Max, and many other outlets offer AVOD tiers that are essentially ad-supported versions of their SVOD platforms, with no free live channels built in. But other AVOD providers like The Roku Channel, Tubi, and Plex do offer free channels, demonstrating that there are different paths to success within the AVOD marketplace.
DTR’s report also highlights the struggles of transactional video-on-demand (TVOD) platforms in the last half-decade. According to nScreenMedia's reporting of DTR's data, since 2016, digital movie rental/purchase websites have seen essentially no net growth. COVID-19 lockdown-generated gains helped tremendously in 2020, but since then the TVOD market has shrunk to pre-pandemic levels.
The $4.2 billion that TVOD companies generated in 2022 is a far cry from what physical discs used to bring in. The disc purchase and rental market was worth $14 billion in 2011, which demonstrates the changes streaming video has wrought on the entertainment industry in the intervening decade. Users are now conditioned to wait for a movie to become available on a given streaming service, instead of rushing to Prime Video or iTunes to snag a digital copy they’ll be able to keep.
So what can TVOD providers do to ensure they stay in business over the next five years, and beyond? They may want to start by lowering prices. New movie purchases on digital platforms are no cheaper than buying a physical disc, despite the fact that DVDs and BluRays frequently come with a ton of behind-the-scenes extras that digital copies do not offer. If TVOD companies were to start offering movies for $5-$10 cheaper, they’d likely boost traffic on their websites quickly.
Perhaps TVOD outlets should also consider providing users with a loyalty program of some type. This could be especially beneficial to a company like Prime Video, which could offer discounts or other promotions on non-video merchandise if users rented or bought a certain number of movies.
In an era where streamers are all suddenly concerned with turning a profit, the TVOD industry has to do something to increase its revenues. nScreenMedia’s reporting shows that DTR predicts the TVOD market will grow at a rate of 1.7% over the next five years, which is barely ahead of inflation. Companies will have to make some changes if they want their TVOD platforms to become more profitable in that time.
Amazon Prime Video
Amazon Prime Video is a subscription video streaming service that includes on-demand access to 10,000+ movies, TV shows, and Prime Originals like “The Lord of the Rings: The Rings of Power,” “Jack Ryan,” “The Marvelous Mrs. Maisel,” “The Boys,” and more. Subscribers can also add third-party services like Max, Showtime, STARZ, and dozens more with Amazon Prime Video Channels. Prime Video also offers exclusive live access to NFL Thursday Night Football.