Ampere Analysis predicts that 2020 will be the year of Advertising supported Video on Demand (AVoD) as free ad models start to build scale and roll-out internationally. The firm admits this prediction may seem optimistic given the low use of the current AVoD services in the US (at between 3 per cent and 6 per cent of US online households), but Ampere believes this to be merely the quiet before the storm.
Although initially reliant on older content, SVoD players have gradually replaced it with their own originals and newer acquisitions. So, for instance, the proportion of Netflix’s catalogue that is over five years old fell from 50 per cent in September 2015 to 35 per cent in September 2019 – a trend that will continue across the sector. In the meantime, the long tail of older content has been embraced by the new AVoD players, who average nearly 80 per cent of their catalogues at five years old by title count, and in the case of Crackle, 70 per cent of content is over 10 years old. This demand for older content not only provides a new market for licensing deep archive, but also offers a boon for distributors and sales agents.
As advertisers rush to support AVoD, spend on online video advertising will inevitably increase as the platforms spread globally in 2020. To date this form of advertising has remained relatively small—even in developed markets like the US where 27.2 per cent of online ad spend is on video, and in Canada where it’s just 5.85 per cent. Ampere expects the rush to AVoD to be supercharged by some of the studio direct models such as Disney’s Hulu and NBC Universal’s Peacock which are expected to adopt a hybrid SVoD/AVoD model.
“AVoD is coming, and it’s going to make its mark on the Video on Demand landscape rapidly,” advised Guy Bisson, Director at Ampere Analysis. “Its impact will be felt not just by the entertainment industry, but by advertising too as the shift that has already disrupted the subscription television market sweeps across the free-to-air sector. AVoD services are treading a well-trodden path with an early reliance on older content, but as their market position grows, we can expect them to begin acquiring newer content and even moving into original production activity as they battle for eyeballs in an increasingly crowded market.”