September 12, 2016 | Authored by: Vindicia Team Blogs
TV networks are reducing ad time for viewers. Should online video follow suit?
This past spring, Turner Networks delivered an upfront presentation which revealed the broadcaster planned to cut advertisements on certain programs, FierceCable reported. Two of the company's new series, "Animal Kingdom" and "Good Behavior", would have 50 percent fewer ads, with that time instead offering an additional 10 minutes of the show in question.
A few months after this announcement, Entertainment Chief Kevin Reilly said the experiment resulted in more viewers. Although he didn't provide any specifics, Reilly indicated the gain was enough to consider the decrease in ad time a success.
"We're finding good results with that," Reilly said during the broadcasting company's event at the Television Critics Association press tour in Los Angeles, according to FierceCable. "Not only is commercial viewing higher, we're seeing a nice ratings lift."
Other networks have followed suit, including Fox Networks Group. The company also announced plans to reduce advertising during shows, specifically on FX and the National Geographic Channel, back in the spring, Variety reported. Randy Freer, Fox president and chief operating officer, made the announcement during the company's upfront market. He expressed his view that to succeed in the world of television today, his network needed to better engage viewers rather than increase revenue through ad spending.
Fewer ads for a better viewer experience
There's no doubt many consumers prefer an ad-free experience to the alternative. In fact, the ability to skip advertisements was a large part of TiVo's success. While the digital video recording service allowed users to watch their favorite shows at their convenience, many enjoyed the service for the ability to fast-forward through ads. When TiVo made some alterations and showed fast-forwarding viewers a pop-up ad, the backlash was so great the company was forced to rethink its strategy.
"Online advertising isn't likely to disappear anytime soon."
The wide spread use of ad-blocking software also points to the idea that fewer ads means a better customer experience. However, online advertising, particularly in regard to over-the-top video content, isn't likely to disappear 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 CTR of any other form of online advertising.
Combining ads and subscription billing
Video services operating on a subscription business model might be tempted to follow in the footsteps of networks like Fox and Turner. Sacrificing ads for viewers isn't that easy, however, especially for smaller organizations without the same annual profit. The trick is for businesses to focus on acquiring and retaining enough customers, thereby generating enough enough revenue to make up for the lack of ads.
If a business wants to provide a better customer experience by minimizing advertisements, it must focus on increasing its subscription base and retaining its customers. Online video providers can do this in two key ways. First, they should offer valuable content at an agreeable price that still allows the company to maintain itself. This means the recurring fee must be high enough to support operating expenses but still low enough to attract a large number of customers.
Second, these companies can use a subscription management service that reduces customer churn rates resulting from declined payments. The right partner helps companies retrying failed transactions and offering back-up payment options. A good service also reduces the friction customers experience when attempting to update their payment information.
Ads continue to be a source of conflict between viewers and content providers, but a subscription business model helps companies keep them to a minimum.
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