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Legacy entertainment giants that first built ad-free, subscription-based streaming services that were modeled after Netflix are increasingly eyeing another path to growth: free TV.
The soon-to-be merged WarnerMedia and Discovery are just the latest to consider it. Discovery, Inc. CEO David Zaslav told investors that by combining the subscription services Discovery+ and HBO Max, the company could create “a subscription-only service, an ad-light service, and then a free digital service.”
Zaslav, who has been tapped to lead the merged company that will be known as Warner Bros. Discovery after it closes in the second quarter, said that a free digital service could help the combined companies extract value from less-trafficked content on their subscription services.
“There’s a load of people that will never pay for television, but they can go and view this content, and that’ll be advertiser-supported,” Zaslav said. “I think there are a number of players that are very tied to this idea of subscription only.”
Déjà vu: Paramount (formerly known as ViacomCBS) has long touted a three-funnel strategy as core to its streaming ambitions, with the free service Pluto TV commanding more than $1 billion in advertising revenue while serving as a marketing vehicle for Paramount+, which has ad-supported and ad-free tiers.
NBCUniversal has also taken a similar approach with Peacock, which has a free tier as well as two paid ones that come with additional content offerings. Meanwhile, entirely free, ad-supported services, including Tubi and Roku, are investing in original content to attract audiences.
No, I don’t want no subs: Executives are warming up to free tiers as evidence of subscription fatigue continues to grow. While more than 80% of US consumers subscribe to at least one paid video-streaming service, an increase in cost was the most likely reason why consumers would consider canceling a subscription, according to Deloitte. Meanwhile, about 55% of consumers already use one free, ad-supported video streaming service, Deloitte found.
And, advertisers are increasingly eager to spend across streaming. Global connected-TV ad spend is projected to rise by nearly a quarter in 2022, to $20.3 billion, according to a recent estimate from GroupM.—KS