Entertainment Companies Eye Free, Ad-Supported Tiers to Boost Growth

Entertainment companies eye free, ad-supported tiers to boost growth

The entertainment industry is looking to adopt new business models to boost growth. Under this model, entertainment companies would offer a free, ad-supported tier of content.

Ad-supported content is nothing new, but it’s becoming an increasingly popular option for entertainment companies looking to boost their growth. As a result, major players in the space are now eyeing free, ad-supported tiers to increase viewership and attract more users.

By doing so, they could reach a wider audience and increase revenue. The move could have significant implications for the future of the entertainment industry.

While some risks are associated with this strategy, the potential benefits could be significant.

Legacy Giants

Traditional entertainment giants that first built ad-free, subscription-based streaming services modeled after Netflix are increasingly looking for another growth path: free T.V.

Warner Media

WarnerMedia and Discovery, soon to merge, are just the latest to consider it. According to Discovery Inc.’s CEO, combining Discovery+ and HBO Max could create “a free digital service, an ad-free digital service, and a subscription-only service.”

Those combined companies might be able to extract value from less-trafficked content on their subscription services if Discover closes the deal in the second quarter.

Many people don’t pay for television, but they have access to this content, which is ad-supported, and big players are committed to this subscription model.

Paramount

Pluto TV is viewed as a source of the advertising revenue of over $1 billion by Paramount (formerly ViacomCBS) to promote Paramount+ in a three-funnel strategy.

The company took a similar strategy with Peacock, which offers a free tier and two paid tiers with additional content. In the meantime, free, ad-supported services such as Roku and Tubi invest in original content to attract audiences.

Disney+

The ad-supported Disney+ service will be introduced alongside the existing ad-free service in the U.S. International markets will follow.

The company expects to reach 230 million to 260 million Disney+ subscribers with the ad-supported streaming service. Disney+ added 11.8 million subscribers during its first fiscal quarter, up from 2.1 million in the previous quarter, and increased its total to 129.8 million as of Jan 1, 2022.

However, subscriber growth has slowed down in previous quarters, especially in the U.S. and Canada.

In a statement, the Chairman of Disney Media and Entertainment Distribution said, “We are pleased to introduce Disney+ to a wider audience and at a lower price point.” This move allows subscribers to enjoy more awesome content and advertisers and reach a wider audience. 

It is also an excellent opportunity for creatives to explore new ways to engage audiences. To make the whole experience as stimulating as you can, consider investing in a high-speed internet connection. Spectrum packages let you bundle up various services with no data caps. 

According to Rita Ferro, the director of advertising at Disney Media and Entertainment Distribution, Disney+ has been generating much interest among advertisers not just because there is a need for a lot of streaming inventory.

Equity Program

A new Nielsen initiative dubbed the Diverse Media Equity Program aims to alleviate some roadblocks that diverse-owned media companies may face when attracting advertisers and agencies’ investment.

For the buy-side, Nielsen continues to develop several reports and metrics to aid agencies and advertisers in planning purchases across diverse-owned media platforms, whether they’re local T.V. stations or streaming platforms.

Nielsen has set up a fund to support diverse-owned media companies that sometimes seek expensive third-party certifications to prove they are minority-owned, an essential step toward capturing more ad dollars.

Subscription Fatigue

As evidence of subscription fatigue grows, executives are warming to the idea of free tiers.

Deloitte found that more than 80% of U.S. consumers subscribe to at least one paid video-streaming service, but increased costs are the most probable reason for canceling subscriptions. In addition, Deloitte found that 55% of consumers already watch free, ad-supported videos on the web.

Additionally, advertisers are increasing their spending on streaming services. According to a recent GroupM estimate, connected-TV ads will spend nearly a quarter more in 2022, reaching $20 billion.

Final Notes

The industry is betting that this will be the future of how people consume entertainment, and it’s a strategy that could prove fruitful in the long run. While there are some concerns about whether or not free, ad-supported tiers can cannibalize subscription revenue.

And while we patiently wait for events to unfold, don’t underestimate the power each subscriber holds. As a consumer, you can choose future consumption of media channels and platforms. Doing so, use an internet connection customized according to your needs. We recommend checking out the incredible Spectrum packages and learn how you can sign up for AutoPay with Charter Spectrum billing to enjoy a hassle free connectivity experience. Happy streaming!