Amid the many disruptive trends roiling the over-the-top (OTT) video business, there’s a big one shaping up in the red-hot free ad-supported streaming TV (FAST) market that needs more attention than it has received so far.
In a nutshell, ongoing success for FAST providers could well hinge on their ability to differentiate their services with compelling content that will require premium service-caliber protection. In fact, it’s fair to say that FAST platform operators are facing the same challenges when it comes to cost-effectively applying the anti-theft shield of an advanced multi-digital rights management (DRM) platform that have long impacted OTT subscription services.
In other words, the fact that services are offered free is no longer decisive when it comes to addressing the security question.
So far, FAST content aggregators, many offering 200 or more linear channels, have managed to amass most of their offerings free of the stringent encryption and digital rights management (DRM) requirements imposed by traditional producers of first-run broadcast TV channels and recently released movies. But market dynamics are changing at a head-spinning pace as major smart TV brands, mainstream media companies, and pay-TV providers jump on the FAST bandwagon.
As a recent study performed by Unisphere Research and Streaming Media attests, the saturation of OTT providers across all service categories has fragmented audiences to the point that 67% of all services have fewer than 1,000 monthly average users (MAUs), and more than a third are generating less than $100,000 in annual revenues. FAST providers, as much as everyone else, are caught in this crunch, leaving them no choice but to do everything they can to increase the appeal of their content.
That includes making sure they can satisfy the security requirements of premium-caliber content producers who want to capitalize on the FAST revenue boom. FAST providers need to be able to react to these requirements quickly and hassle-free with a flexible, cost-effective approach to protecting premium content whenever such steps become essential to maintaining a competitive edge. A deeper look at the rapidly evolving ad-supported OTT market underscores why this is the case.
The Transformative Force of Free OTT Services
Over the past three years, ad-supported video-on-demand (AVOD) service launches with linear TV lineups rivaling traditional pay-TV have triggered a massive shift of TV ad spending into the OTT sector. Globally, Digital TV Research projects the annual ad revenue total flowing into AVOD, including FAST, will go from $27 billion in 2020 to $66 billion in 2026. With SVOD revenues projected to increase from $59 billion to $126 billion in that period, the AVOD percentage of total OTT revenue would increase from 31.3% to 34.4%.
FAST as a category within the larger AVOD segment is distinguished by the fact that there are no subscription fees and all content is streamed linearly like traditional TV, although most FAST providers time shift the content for on-demand consumption as well. Much of the growth has been centered in the U.S., with revenue projected by nScreen Media to nearly double from $2.1 billion in 2021 to $4.1 billion in 2023.
Variety, in its latest “Life in the F.A.S.T. Lane” report, reveals that between July 2020 and October 2021 the FAST channel count in the U.S. jumped from 550 to over 1,000. Noting that a majority of traditional media companies and professional sports leagues now operate FAST channels, Variety says, “FAST has quickly moved from an area dominated by start-ups and digital brands to the latest avenue for established media and entertainment companies.”
According to eMarketer, there were 89.2 million monthly FAST viewers in the U.S. as of YE 2021, many of whom are also part of the larger 128-million monthly AVOD viewing audience. Notably, 2021 was the first year the AVOD viewing numbers represented more than 50% of the total OTT viewership, eMarketer said.
A big factor in the financial success of FAST, as well as AVOD services, has been advertisers’ willingness to pay higher prices for targeted advertising that exploits the on-the-fly dynamic ad insertion (DAI) capabilities service providers have introduced with unicast streaming. Where traditional linear TV 30-second spots typically garner between $10 and $25 per 1,000 viewer impressions (the cost-per-mille or CPM rate), FAST, where ad personalization is the norm, is generating $40-$50 CPMs, as reported by Harmonic, Inc. director of solutions Robert Gambino.
Strategic Shifts in FAST Services
This turn of events is driving new thinking across the OTT ecosystem, prompting big media players and market newcomers alike to explore how to attain market advantage at the crossroads between FAST and AVOD. Inevitably, those lines will continue blurring as ever more content rights holders seek to exploit the appeal of FAST offerings to a mounting tide of consumers looking to get the content they want without paying subscription prices.
The forces at play and the exuberance of service providers in a position to exploit them were clearly in evidence during a presentation by Paramount president and CEO Bob Bakish at a recent Morgan Stanley Technology, Media & Telecom Conference. As recounted by Fierce Video, Bakish led his description of developments at Paramount, the new name of the ViacomCBS amalgam, by touting the success of FAST service Pluto TV.
Calling Pluto a “rocket ship,” he noted the service added 10 million monthly average users (MAUs) in Q4 2021 to bring its global MAU count to 64 million. “That is significant growth, and it shows the validity of free, ad-supported [services] in the current marketplace,” he said.
Paramount’s ability to orchestrate the Pluto channel mix in tandem with the content offered through its Paramount+ AVOD service reflects one of the major trends taking hold in the FAST marketplace. In this tiered-service approach, AVOD and even SVOD providers are leveraging public hunger for free services as a way to draw consumers to their brands and the fee-based options. As noted by TV[R]EV lead analyst Alan Wolk in another recent Fierce Video article, this “is the way of the future” in OTT services.
One of the more recent cases in point is Peacock Free, which Comcast launched as a FAST service with more than 7,500 hours of programming to complement its Peacock Premium AVOD and Premium Plus SVOD services. These services deliver a comprehensive catalog of NBC Universal TV shows and movies with ads at $4.99 monthly or ad-free at $9.99.
Peacock Free offers next-day access to the current programming available on the premium services as well as a vast catalog of classic TV programming, older movies and daily news, and some sports, including recent Olympic coverage. This illustrates how, increasingly, big media players are leveraging their licensing power and operational platforms to bring some of the content offered over their subscription services into the FAST domain.