The AVOD outlook for 2023

AVOD and FAST channels were the story of 2022 as entrepreneurs and media outlets sought new revenue models. Will it be much the same in 2023?
December 21, 2022

AVOD: Advertising-based Video On Demand
SVOD: Subscription-based Video On Demand
TVOD: Transactional Video On Demand

This year, ad-based platforms were the talk of the town, between major streamers expanding into AVOD tiers to the influx of FAST channels.

But is it all hype or the new normal?

Ad-supported streamers like Peacock and Tubi are starting to inch out their subscription-based competitors for eyeballs, says James Muldrow, VP of product management at US media analytics company Comscore.

Comscore data published in June shows that the number of households adopting AVODs saw a 12% increase since 2021, from 69.1 million in March 2021 to 77.5 million in March 2022. SVODs saw an 8% increase over the same period, reaching 77.2 million, up from last year’s 71.5 million.

The AVOD market is poised to continue to grow into next year, amplified by the rising popularity of FAST channels (linear channels distributed digitally by services like Pluto or Roku) according to Muldrow. 

“FAST channels [evoke] some familiarity for consumers because it reminds them of cable,” says Philippe Guelton, chief revenue officer at Chicken Soup for the Soul Entertainment, a Connecticut-based prodco and AVOD operator. 

Consumers are likely gaining a higher tolerance of ads (again), which may continue to fuel growth in the AVOD market. With Netflix (223 million subscribers) and Disney+ (164 million subscribers) offering discounted tiers in exchange for serving ads, many are likely to choose to endure a few ads in exchange for half-price subscriptions. 

However, Guelton is critical of the approach, arguing that it’s double dipping to both charge fees and serve ads, and that consumers may feel the same. In contrast to the streaming giants, Chicken Soup keeps all its ad-supported streamers free.

“Consumers have become educated and aware that they don’t have to spend a ton of money and subscribe to 10 different services to access premium family content,” Guelton says. “Part of our mission is to serve value-conscious consumers, which is most of America.” 

The situation is more complex for AVODs when it comes to kids content, creating both challenge and opportunity. In creating a safe space for kids and families, ads need to be regulation-compliant and of high quality, argues Brenda Bisner, chief content officer at Kidoodle.TV, a streamer for kids under 12 with both AVOD and SVOD tiers. “We are living in a time where seeing an ad is a cost of time viewers are willing to invest in,” she says. At Kidoodle, the company works to achieve both by having a team of humans (as opposed to robots) vet content and ads to ensure the quality is up to standard. 

Interestingly, platforms like Kidoodle that are required to meet COPA standards, are emerging as a haven for advertisers keen to have premium space for their ads and the budgets to put against them.

Looking ahead to the new year, experts like Muldrow say the expansion of AVOD will carry on and accompany the ongoing consolidation of platforms into super services. That trend will reduce costs, as well as the burden of choice, for consumers. 

Chicken Soup is already focused on building out its own super service, the Redbox app (which houses AVOD, FAST and TVOD) to serve as a contender in the streaming marketplace for families who seek affordable entertainment. Guelton is particularly hopeful about Redbox’s kids offerings, which include the app’s growing collection of FAST channels dedicated to brands like Baby Shark and LEGO.

Image courtesy of Nicolas J Leclercq via Unsplash.

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