The latest news announcement in the OTT space is that Amazon Prime will begin showing ads from January 29th. Other OTT platforms have already started adopting this model. Termed OTT based Advertising, this model takes us back to television days where ad breaks were the only time to run to the kitchen to get that hot bucket of popcorn.
This news has been in circulation since earlier this year but only got its date, the 29th of January, recently. “This will allow us to continue investing in compelling content and keep increasing that investment over a long period of time,” the company said in an email to customers about the pending shift to “limited advertisements.”
“We aim to have meaningfully fewer ads than linear TV and other streaming TV providers. No action is required from you, and there is no change to the current price of your Prime membership,” the company wrote. Additionally, if customers want to avoid these adds they’d have to top up their account by paying an extra $2.99.
Amazon Prime primarily costs $14.99 each month or $139 annually, with a per month for Prime video alone costing $8.99. With the introduction of ad aided streaming, the new prices of ad-free streaming has risen to, for prime, just under $18 per month, and standalone Prime Video to just under $12 per month. (Other OTTs ad plans)
Additionally on the side, Amazon also operates Freevee, a free, ad-sponsored streaming service for live events, sports and content. The company’s email noted that “live event content such as sports, and content offered through Amazon Freevee will continue to include advertising.”.
To understand how OTT has become the new battleground of advertising we need to step back a little and understand OTT advertising as a whole before coming to Amazon Prime Video and its announcement.
In 2018, it was predicted that streaming platforms will offer advertisements and its finally coming true. Netflix has also announced its lower-price offer that comes with an advertisement supported tier to support its business. The reason for this is simple – the market for new subscribers has become very competitive and the price of great content has become too expensive. Consumers now have a lot of options with the expanding OTT streaming platform variety. Their options in choosing to watch ad-free by paying more has also increased. Although OTT platforms grew significantly during the pandemic, ad supported streaming seems the future of sustaining OTT.
Producing high quality content in a subscription based model to attract customers comes at a hiked cost which are directly passed onto the consumers. This can lead to the decrease of subscribers as seen in many markets. On the other hand, consumers are beginning to demand an array of high quality content without a hefty fee. How do we bridge this gap? Advertisements.
India is an advertisement dominant market. Almost 63% of India’s $1.7 billion OTT market is accounted for by advertising video-on-demand revenues according to Elara Capital.
Across the globe, Gen Z and young millennials are the top section of audience for OTT platforms. These age groups are often heavy users that consumer several hours of content per day. As trendsetters, their taste dictates the top trending OTT genres and contents. To create sustainable relationships with this audience, OTT platforms and advertisers will have to design and deliver campaigns that resonate with the audience’s ideas.
The Indian Context
While there have been updates regarding the ad supported OTT streaming for the US there seems to be little information on the status in India. It is interesting to note the Indian context of video watching. Indian TV and Soap have been known for notoriously being interupted by ads. Hence, this new shift in the OTT platform, abiet maybe being frustrating, might not necesarily be new to this nation. There was a lot of positive response to when Netflix introduced the rupees 199 plan for watching on any device – since this allowed the distribution of content and the consumption of great quality content on a much lower price tier and thereby introducing a whole new gamut of clients for the business. OTT consumption has also increased in India with traditionally Television shows such as BigBoss getting their own 24/7 OTT playback. Many prefer waiting and watching movies as it comes out in the OTT rather than going to theatres. Considering the bleak slate of 2024 according to Hollywood and English cinema, getting Indian audiences to part take in the Hollywood/English theatrical experience might be a task!
With Disney and Netflix, now Amazon too, moving towards advertising, the potential of OTT advertising has been established. This will lead to a notable shift in advertising trends, design and genres.
This move comes across as a response to the increasing competition for cheaper subscription rates across the board. This causes companies to push ads to the cheapest monthly plans. The price as such isn’t changing for Prime, but if you want to continue without ads, you’d have to pay extra.
What does this signify? From when content was free without ads on YouTube, to having ads for free content we now have come to ads with paid content. The industry is seriously grappling with the crisis of meeting the costs of creative quality content with the demand for cheap subscription plans by the consumers. Especially after the writers strike in 2023, the demand and the equivalent price of quality content has become higher. Does this imply that the entertainment, especially the OTT, industry is becoming more elite? Does it privilege some and exclude those who cannot afford to pay extra? These are some questions that come up in the debate of advertisement supported OTT streaming platforms.