In a stunning reversal that’s sent shockwaves through the media industry, streaming giants like Netflix and Disney+ have embraced the once-shunned TV commercial. This seismic shift is set to propel the UK’s streaming television advertising market past the £1 billion milestone, marking a new era in the heated battle for viewers’ attention – and advertisers’ budgets.
For years, the prevailing wisdom was that streaming spelled doom for the TV ad. Netflix, the industry’s undisputed champion, staked its reputation on an uninterrupted, commercial-free experience. Consumers, the thinking went, would gladly pay a premium to escape the incessant barrage of advertising breaks.
Oh, how times have changed. Faced with slowing subscriber growth and intensifying competition, the streaming behemoths have done an about-face, turning to advertising as a life raft in choppy economic waters. And the results have been nothing short of astounding.
The Newcomers Make Their Move
Leading the charge is Netflix, which launched its ad-supported tier in November 2022 after years of resisting the siren call of commercials. The gamble paid off handsomely: Netflix’s lower-priced, ad-supported plan has already amassed 70 million monthly viewers globally, proving that even the most ad-averse consumers can be swayed by the right price point.
Not to be outdone, Disney+ followed suit, introducing its own ad-supported offering. While adoption has been more modest, with just 7% of its nearly 7 million UK subscribers opting for the ad-tier, the potential for growth is enormous as cost-conscious consumers seek out more affordable streaming options.
The £1 Billion Ad Bonanza
The impact of this advertising pivot cannot be overstated. In 2022, the UK streaming ad market was already a robust £746 million, representing nearly a fifth of the £3.9 billion traditional TV ad market. Fast forward to 2024, and streaming advertising is projected to balloon to £1.1 billion, capturing a staggering 30% of the total TV ad spend.
“Advertising supported streaming has unquestionably been a big winner,” says Rory Gooderick, a senior analyst at Ampere. “But the ad-tiers offered by the [US] streamers are still fairly immature, with low advertising loads, and a minority of customers are on ad-supported tiers, aside from Amazon which introduced ads for all customers.”
While the streaming newcomers are making impressive strides, it’s the established players – particularly the UK’s ITV and Channel 4 – that continue to dominate the streaming ad landscape. ITV’s £800m+ streaming bet, ITVX, has seen viewership surge, with streaming hours jumping 14% to 1.24 billion. Channel 4, meanwhile, is on track to exceed £300 million in digital ad revenues this year.
The Traditional TV Conundrum
For all the fanfare surrounding streaming’s ad ascendancy, it’s not all doom and gloom for traditional television. While ad revenues are undeniably migrating to streaming platforms, the pace of decline in linear TV advertising has slowed. Still, the writing is on the wall: broadcasters’ video-on-demand services simply aren’t compensating for the losses in linear advertising.
“Broadcaster decline is slowing down, that is clear,” says Tom Harrington, the head of television at Enders. “It is not as bad as it was, but broadcasters’ video-on-demand services are not balancing the decline in linear TV. Streaming is not keeping up with the viewing decline, the amount leaving broadcasters is still more than material.”
The Battle for Ad Dollars Intensifies
As the streaming ad market balloons, the competition for advertisers’ budgets is heating up. While Netflix and Disney+ have made impressive inroads, they face an uphill battle to match the reach and engagement of established players like ITV and Channel 4.
For now, the streaming giants are content to undercut broadcasters on price, offering tantalizing rates to lure advertisers. But this strategy may prove short-sighted, as the streamers grapple with the challenges of ad targeting, measurement, and providing concrete campaign performance data – areas where traditional TV excels.
“The likes of Netflix may only be taking some crumbs off the table of an ITV or Channel 4 at the moment,” says media analyst Alex DeGroote. “But sooner or later these ad tiers are going to really work, and then: watch out.”
The Future of TV Advertising
As the streaming ad market surges past £1 billion, one thing is certain: the future of television advertising is being rewritten before our eyes. The once-impenetrable wall between streaming and commercials has crumbled, and a new era of ad-supported viewing is upon us.
For advertisers, the opportunities are immense. The ability to reach highly engaged, targeted audiences across a fragmented media landscape is a tantalizing prospect. But navigating this complex new world will require a deft touch, as traditional ad metrics and conventions are upended.
As for the streaming platforms themselves, the embrace of advertising marks a watershed moment. No longer can they rely solely on subscription revenue to fuel their ambitions. The race is on to build ad businesses that can match the scale and sophistication of their linear TV counterparts.
In the end, the winners will be those who can strike the right balance between user experience and advertiser value. The streaming ad revolution has begun, and there’s no turning back.
