Ampere Analysis has called it: 2020 will be the year of advertising-supported Video on Demand (AVOD) as free ad models start to build scale and roll-out internationally. “This prediction may seem optimistic given the low use of the current AVOD services in the U.S., at between 3-6% of online households – but we think this is merely the quiet before the storm,” the analyst firm says.
The company observes that as SVOD services shift towards originals and new content acquisitions, and so turn away from older catalogue titles, this has created an opportunity for AVOD providers.
“The proportion of Netflix’s catalogue that is over five years old fell from 50% in September 2015 to 35% in September 2019—a trend that will continue across the sector,” the company says. “In the meantime, the long tail of older content has been embraced by the new AVOD players. On average, nearly 80% of their catalogues are five years old, by title count. In the case of Crackle, 70% of content is over 10 years old.”
Ampere reckons the demand for older content provides a new market for licensing deep archive, and also provides a boon for distributors and sales agents.
The company expects some of the ‘studio direct’ [direct-to-consumer] services like NBC Universal’s Peacock to adopt a hybrid SVOD/AVOD business model and believes they will supercharge the AVOD market. Ampere Analysis expects a subsequent increase in online video advertising as the AVOD platforms spread globally. “To date, this form of advertising [online video] has remained relatively small, even in developed markets like the U.S. where 27.2% of online ad spend is on video, and in Canada where it’s just 5.85%.”
Guy Bisson, Director at Ampere Analysis, declares: “AVOD is coming, and it’s going to make its mark on the Video on Demand landscape rapidly. 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 following 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 move into original production activity as they battle for eyeballs in an increasingly crowded market.”