Once More Into The Breach: Our Fearless Predictions For 2024
1. On January 29th, Amazon Will Upend The TV Industry
That is the day that Amazon will move all Prime Video members to its new ad-supported tier. We estimate that only 30 percent of them will take Amazon up on their offer to pay an extra $3/month to upgrade to the ad-free tier. (And that is a conservative estimate.)
Right now, Amazon doesn’t have any high profile “don’t talk to me I’m watching TV” shows that someone would feel strongly about watching ad-free.
Plus there are a whole lot of people who use Amazon to watch live sports (Thursday Night Football) which will still have ads on it, no matter which tier they choose. Or they mostly use Prime to rent movies, which means they won’t see ads even with the new plan regardless.
So there’s that.
But mostly there’s this: While Amazon does not release subscriber numbers, most estimates assume there are somewhere between 160 to 170 million Prime subscribers in the US. Where it gets tricky is that it is unclear how many of them actually watch Prime Video, versus just subscribing for the free two-day delivery.
Figure though, that around half of them watch Prime Video at some point each month—that’s 80 to 85 million people. And if 70 percent of them wind up in the ad-supported tier… that’s somewhere between 55 to 60 million new ad-supported streaming viewers in the US who will get added to the greater ad-supported streaming mix later this month. (For comparison, Netflix only has 15 million ad-supported viewers worldwide.)
That’s a whole lot of people and thus, a whole lot of inventory.
Amazon might also know a thing or two about all those people’s shopping habits. That makes Amazon’s ads valuable to marketers looking to target specific audiences (“people who have bought our competitor’s product”) and/or advertisers looking to gauge the effectiveness of their ads, e.g. did anyone actually buy anything when we ran our ad?
So there’s that too.
The fallout is likely to benefit the entire streaming industry. More dollars will shift to streaming. More advertisers will become comfortable with the idea of streaming advertising. More consumers will become comfortable with the idea of ad-supported subscription streaming.
And Amazon will make even more money, while becoming a real advertising powerhouse.
A development that is unlikely to go unnoticed by ambitious elected officials in DC.
2. Shoppable Content Becomes A Thing
Speaking of Amazon, they are also going to help make shoppable content a thing. They’ve already given us a taste of what they can do using the X-Ray bar during the Black Friday NFL game and it seems they are planning to expand the program, especially once their ad-supported base grows.
They’re not the only ones either.
New AI-based software is making it easy for brands to add shopability to their commercials across the streaming landscape.
That said, most of the 2024 budget on this is going to be experimental. Brands still aren’t sure how this will work, if it will actually be any different than direct response advertising, how to measure it.
If it works the way they expect, it will be much bigger in 2025. If not, then back to the drawing board.
But I’m betting on it becoming a sizable part of the TV ecosystem, essentially replacing direct response and then some, while bringing a slew of big-name advertisers who would not have been caught dead running direct response ads, into the fold.
3. Self-Serve Revolutionizes Local
Our next prediction is one that will help shoppable content and shoppable advertising grow: the emergence of self-service TV advertising as a booming new category in 2024.
Self-service is the TV industry’s attempt to grab all that small and medium business (SMB) budget from Meta and Alphabet.
It has not gone unnoticed that the bulk of Facebook’s ad revenue comes from small and medium businesses who use the social media giant’s self-serve ad platform to run hyper-targeted ads, and so, the thinking goes, TV companies need to launch a competitive product in order to shift a bunch of that income to TV.
That is why Amazon, Paramount and others have already launched self-serve ad platforms; and why we suspect/predict that local broadcast groups and local broadcast stations will follow suit. Because a big chunk of the SMBs who are the prime audience for self-service are local businesses, and so local broadcasters would be foolish not to pursue them.
The growth of AI-based software that helps self-serve customers quickly and easily create their own TV commercials will really be what drives this shift, as the difficulty of making their own TV commercials is what kept most SMBs from even considering the medium.
While early adopters will help propel the shift in 2024, we're thinking 2025 will be the year the mass of potential self-serve advertisers realize how easy it is to create and run their own TV spots. And that said realization will come about because political campaigns—down ballot races in particular—will be the ones clearing the path and spreading the word. (Well, that and TVREV.)
4. The OS Wars Continue
The OS Wars, for those of you who are not yet familiar with the term, refers to the battle being fought over who owns the operating system on your TV.
This is actually a huge thing, because whoever controls the OS controls what content goes on the TV: which apps, what order they appear in, how they’re recommended to viewers, which ones are pre-installed. The OS owner also gets to create revenue for themselves by selling ad space on the home screen to programmers that want to promote their own shows and/or apps.
So there’s a lot of money to be made from owning the OS, and the battle is playing out on a global basis.
At a very high level, the OS wars will pit tech giants Amazon and Google against consumer electronics giants Samsung and LG.
But there are many more players involved. Everyone seems to be getting into the game, from Roku to Hisense and its new Vidaa interface, to VIZIO, which announced plans to start licensing its interface this year, to Comcast which rolled out its Xumo interface this year too.
And those are just the OEMs.
There’s another layer consisting of players like Foxxum and TiVO who are making white label operating systems for smaller OEMs worldwide.
Point being, it’s a big market and the stakes are only going to increase as streaming continues to grow.
So look for more players getting involved, both big and small with some potential M&A as a result. We’ll also see a gradual awakening by the studios and people making the shows, as to how much this all matters, and that maybe it would make sense for them to, you know, take sides.
5. Sports Fans Are Increasingly Pissed Off
Streaming has been a boon for most consumers. They can binge watch TV to their heart’s content, with access to pretty much every TV show or movie ever made. And unless they are subscribing to every single SVOD service out there, the cost is pretty reasonable too. (For now.)
There is, however, one exception: the sports fan.
Sports on streaming is a logistical nightmare, as pieces of each league wind up on different services as well as on broadcast TV. This requires fans to constantly track down where the game they want to see is playing, while also taking out subscriptions for far more apps than they’d prefer.
Compare that to traditional pay TV where a single subscription got them access to pretty much every game (because local blackouts) along with a program guide to help locate said games.
It is no wonder then, that sports fans are pissed off.
And unless someone can put together a package that, say, give NFL fans access to NFL games across the streaming ecosystem (a highly doubtful development), they will continue to be pissed off.
The question is whether the fans take it out on the leagues or the streaming services? Our guess is a little of both, with streaming ratings growing, but not coming anywhere close to broadcast ratings. A situation that will remain, as fans grow increasingly disenchanted with the leagues, who they see as more concerned with profits and less concerned with fans.
6. Streaming Starts Experimenting With Longer Seasons
One of the ways a show like Friends or The Office permeated our collective psyches was by just showing up.
As in week after week, for around 25 weeks a year.
Not every episode was gold, or even bronze. But there were a lot of them, and we got to know the characters as well as we knew many of our own friends and family members as we watched them grow and change over the years.
That sort of magic is hard to get from a couple of ten episode seasons.
In addition to the magic, there are all sorts of financial incentives, such as massive syndication fees when the show is licensed to a FAST service or overseas. Not to mention 10 years worth of branded hats, sweatshirts, sheet sets and the like.
Which is why we suspect that streaming services—especially streaming services affiliated with legacy media companies who know the value of a good franchise series—are going to start thinking about doing series, probably sitcoms, with longer seasons this year.
(NB: “Thinking about them” in 2024 means those shows won’t air until 2025 or 2026. And who knows what shape those legacy media streamers will be in by then. But this is a trend that is not going away)
7. Contextual Targeting Takes Off
There’s a growing recognition that the data sets used on TV are often quite lacking, based as they are on faulty assumptions and outdated data sets.
And that even if they weren’t, the scale of most streaming services is quite different than that of Meta or Alphabet. As in the Left-Handed Juggler example: you want left-handed jugglers on Facebook, they have 10,000 of them. You want them on a streaming service, they’ll tell you neither of them is watching this week.
So there’s that and then there’s the brand safety/relevancy issue—you don’t want your funny ad running during the funeral scene.
Using generative AI and content ID tags, vendors can now get very very very granular as to what is happening on screen. That means they can identify scenes that are ideal for a certain brand (a QSR restaurant during a scene where the characters are talking about where to go for dinner) while also allowing them to avoid brand relevance pitfalls
I suspect we’ll eventually start to see publishers charging a premium for these sort of “ideal slots” and/or identifying the type of advertiser the slots would be right for.
But that’s a 2025 thing. In 2024, we’ll just see more brands using contextual targeting on streaming.
8. The Price Gap Between Ad-Supported and Ad-Free Tiers Gets Much Wider
Why does someone decide to subscribe (or re-subscribe) to a streaming service? Usually, it’s because there’s a specific show they want to watch. And if the price difference between watching that show with or without ads is only $5, there’s probably not a whole lot of hesitation about going ad-free. Especially if the viewer is only planning to subscribe for a few months.
That’s why we suspect that SVOD services are going to start making that price gap much wider. Much, much, much wider. (That’s three “much’s.”) Because when that gap is $20 or more, ad-free is a much harder decision to justify.
Add in too that SVOD services need to get to somewhere closer to having 50 percent to 60 percent of their viewers on the ad-supported tier for it all to make sense. And a wider price gap is one of the easiest ways to do that. As are really attractive ad-supported bundles, like the one Verizon is offering for Netflix and Max. You can expect to see a lot more of those too next year.
9. FASTs Become Even More Well Entrenched
As tactics like the one above push more and more viewers to ad-supported subscription tiers, the notion of watching ads on streaming will only become more normalized.
Which means that FASTs will also become more normalized, especially as more viewers discover them and turn to them for their “lean back” viewing.
Content on the FASTs will get better too, as the major media companies start selling more of their library series to FASTs to raise cash.
Ditto better user experiences, like more seamless integration between linear channels and on-demand libraries.
As for the FASTs themselves, look for them to push users to set up accounts so they can capture email addresses in order to more easily track them across devices.
This will, of course, be framed as a way to let users save favorite shows to their watchlists and to be able to pick up again right where they left off.
And the reason that the FASTs are going to be pushing this next year is our next prediction.
10. IPV6 Takes The Industry By Surprise
IPV6 is what comes after IPV4 and it’s not going to be pretty for an industry that is used to relying on IP addresses to establish identity and location.
Allow me to quickly explain: IPV4 relies on 32-bit addresses, meaning that there are approximately 4 billion addresses. Despite that huge-sounding number, it is relatively easy to geolocate people based on their IPV4 address. That, and all internet-connected devices in a household typically share an IP address, so if you can ID one person on the node, you can identify them all.
That all goes away with IPV6, which uses 128-bit addresses, giving it a virtually infinite supply of IP addresses. That means it will be extremely challenging to continue to rely on IP addresses for geolocation.
It also means that every device in the household gets its own IP address, so no using the household graph for targeting. Worse still (for advertisers) IP addresses will be swapped out on a fairly regular basis to ensure greater privacy.
Meaning the television industry is going to have to come up with a different way to figure out who all those streaming viewers are.
The move won’t just affect advertising either—it will impact everything from content recommendations to viewership analytics.
The good news (again, for advertisers) is that this shift is not happening in the next year or two. But 2024 will be the year that everyone starts to take notice and figure out ways to avoid getting caught flat-footed.
That is likely to mean a lot of attempts to capture email addresses as well as ways to connect all the devices on the household graph.
So look for the threat of IPV6 to impact a lot of ad-related decisions in the year to come.
