As OTT popularity continues to
grow, it’s no surprise that most viewers
prefer ad-free experiences such as
Netflix, Hulu, and Amazon Prime.
History points the way. The ability
to skip commercials was a large part
of TiVo’s original success. While the
service allowed users to watch their
favorite shows at their convenience,
many enjoyed the service for the ability
to fast-for ward through ads. When TiVo
made some alterations and showed
fast-for warding viewers a pop-up ad,
the backlash was so great the company
was forced to rethink its strategy.
With this in mind, your organization
may be well advised to consider a
subscription-based model for OTT
delivery. The benefits include:
• Predictable revenue streams.
Consumers who subscribe to your
services pay for them automatically
on a regular basis.
• Less upfront commitment for
consumers. Many OT T subscription
services start with a free trial and let
subscribers cancel at any time.
• Price and promotion flexibility.
You can continuously refine the way
you price and promote your offering
to maximize customer acquisition
• Long-term relationships. Once
consumers have subscribed, they
are less likely to switch to competing
offerings, provided that you maintain
a high-quality user experience and
continue to deliver appealing content.
• Control over the customer
experience. You can build stronger
relationships by improving the way
subscribers access your content across
their various devices.
Nonetheless, advertising isn’t likely
to totally disappear from the OTT
landscape anytime soon. According to
Business Insider, revenue from video ads
is expected to reach almost $5 billion
this year. With a click-through rate of 1. 8
percent, video ads have the highest C TR
of any other form of online advertising.
HYBRID MODEL: COMBINING
ADS WITH SUBSCRIPTIONS
Your organization may want to
consider a hybrid model that provides
certain ad-funded content for free,
combined with subscription-based
premium content. In so doing, it may
be advisable to follow in the footsteps
of broadcast networks like Fox and
Turner that are reducing total ad time
(see sidebar). Sacrificing ads for viewers
isn’t always easy, however. The trick
is to focus on acquiring and retaining
enough customers, thereby generating
sufficient revenue to make up for the
lack of ad revenue.
If your business wants to provide
a better customer experience by
minimizing ads, you should focus on
increasing your subscription base and
retaining your customers over time.
You can do this in two key ways. First,
you should offer valuable content at an
agreeable price that still allows you to
Second, you should consider using
a subscription billing service that
reduces customer churn resulting
from declined payments. The right
partner can be extremely helpful in
resolving failed transactions and
offering back-up payment options.
A good service can also reduce the
friction that consumers experience
when attempting to update their
Ads will undoubtedly continue
to be a source of friction between
viewers and OT T providers. However,
a pure subscription model or a hybrid
arrangement coupled with an aggressive
retention strategy to combat subscriber
churn will help your business minimize
or eliminate ads and thereby reduce
TV Networks Are Reducing Ad Time.
Should OTT Follow Suit?
This year, Turner Networks delivered an upfront presentation revealing their plan to cut ads
on certain programs. Two new series, “Animal Kingdom” and “Good Behavior,” will have
50% fewer ads, with that time instead offering an additional 10 minutes of the show in
question. A few months after the announcement, Entertainment Chief Kevin Reilly said the
experiment resulted in more viewers.
“We’re finding good results with that,” Reilly said at the Television Critics Association press
tour in Los Angeles. “Not only is commercial viewing higher, we’re seeing a nice ratings lift.”
Other networks have followed suit, including Fox who announced plans to reduce
advertising during shows on FX and the National Geographic Channel. Randy Freer, Fox
president and COO, stated that his network needed to better engage viewers rather than
increase revenue through ad spending.
Should your OTT strategy follow this ad reduction trend as well?