A Comeback for TV Advertising

 

A Comeback for TV Advertising

Once upon a time, we'd all be buzzing about new fall TV shows right now. But that fall season buzz is one more casualty of the streaming revolution. It's generally a sacrifice worth making. September has become a less exciting time for TV, but in turn we get better TV all year round -- and usually without ads, at least if we're watching the two leading streaming services, Netflix and Disney+. 

Don't expect the fall season to regain its importance again, but those ads? They're making a comeback. In the coming months, both Netflix and Disney are planning to launch new advertising tiers. In Barron's cover story this weekend, Jack Hough explains why it's a potential turning point for the TV industry, streaming subscribers, and investors. 

Netflix needs ads to offer cheaper plans, in order to restart subscriber growth. Disney needs to offset its losses in the cable television landscape, where cord cutting is gaining steam. 

Here are the stakes, according to Jack: 

Much could go wrong in the near term for these companies and their rivals. A glut of advertising slots could push industry prices lower, especially if the economy weakens. Too many ads per hour could frustrate viewers. Too few could accelerate defections from full-price streaming tiers and cable.

Yet, if the television industry is successful, it could not only rekindle growth, but also pull back power that has been lost to the closed-off advertising economies of Google and Facebook .

A new Netflix ad tier is expected by November. The Disney+ version is due in December. 

The companies will have to balance new revenue opportunities with keeping viewers happy, most of which flocked to streaming to avoid the ads that clutter broadcast and cable TV. Jack notes that Netflix is expected to start with a so-called ad load of four minutes per hour, but it might not stay that low for long:

Jessica Reif Ehrlich, a media analyst at BofA, predicts what she calls silent price hikes in the form of a quick rise in ads for each hour. “There’s no way it’s going to stay at three, four, five minutes,” she says. “Hopefully it won’t be what we see on linear, which is unbearable.”

For more on the future of advertising and streaming TV, read Jack's cover story here.