NAB
The Media & Entertainment market will top $1 trillion in 2024, with advertising making up the majority of revenues with pay-to-free models stimulating advertising growth in 2024.
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Agenda setting figures, forecasts and analysis from Omdia will be released at NAB Show during the session, “The Future of FAST: Lessons Learned and What’s Next,” presented by senior research director and technology fellow Maria Rua Aguete.
With online video taking the lion’s share ($367 billion) of the $1 trillion global total, the industry shouldn’t neglect traditional TV. Its total revenue is not far behind on $345 billion. Games comprises $255 billion of the total and cinema comes in at $41 billion.
Contrary to popular belief, pay-TV has not declined massively. “It is more the case that online has grown considerably. In other words, pay-TV is here to stay for foreseeable future but moving forward, online is where the growth is.”
What is notable is that advertising makes up the bulk of all revenues: 62% of the online video total and 43% for traditional TV. Even a third of revenue from games this year will come from ads.
What’s more: online video advertising will continue to grow at 17% CAGR as it has done since 2018 to become the top source of revenue in 2028.
SVOD subs are growing but growth has slowed. The number of SVOD services is now set, with no new major streaming services expected. “Consolidation is the way forward,” she says.
Video service stacking is still on the rise mainly due to free services. Pay-to-Free will stimulate advertising growth in 2024.
All major studios, Netflix and Amazon included, are moving ahead “more forcefully” with ad-centric strategies this year.
Of the $377 billion total video advertising pie predicted by Omdia for 2024, $8 billion will come from Free Ad Supported TV (FAST) channels. It’s a lot — but pales in comparison to the $32 billion from premium AVOD, the $131 billion from social media and the $141 billion from linear TV advertising.
FAST in fact represents just 7% of the total premium TV and video ad revenue
“We don’t think the industry should be so obsessed with FAST to the point that it obscures all else. Other ad revenue streams are equally if not more important,” says Rua Aguete. “Do I believe in FAST? — Yes, with the context of how much value there is from ads across all media and in context of each market.”
As a result, Omdia forecasts a future of hybrid streaming models with FAST in the mix.
Total revenues from FAST will continue to grow to $12 billion by 2028 dominated by the US, and approach $13 billion by 2029 by which time Western Europe’s share will only have topped $1 billion and LATAM $400 billion.
The US will dominate the FAST market in 2028, as it does now, followed by the UK, Brazil, Canada and Australia.
“The appetite for FAST is growing among consumers more quickly in countries like the UK (where viewership has grown seven times in the last three years, or, put another way, 21% of people use FAST on weekly basis) compared to the US, which has grown less than two times in the same period to 46% of people using FAST on a regular basis.”
The popularity of FAST among Americans is explained by the country having no real history of free-to-air broadcast.
Another key point that Omdia will draw is the dominance of hardware players in the FAST landscape. Pluto is the global leader with the likes of Vizio, Roku, Samsung, Tivo, Hisense and Xumo also active. That the hardware players are very interested in this ad world is simple math and business sense.
Rua Aguete shares data that total TV hardware revenue in 2022 was $21 million in the United States and that CTV ad revenue in the same territory is comparable at $20 million. Yet profit margins are much higher on advertising revenue than on hardware sales.
“If hardware players can make a profit of more than 50% on advertising versus less than 1% on actual hardware product their interest in advertising is clear. The TV hardware business is struggling but the platform business is growing.”
For example, Vizio’s smart TV platform revenue was $533 million (3Q22–2Q23) with profits of $322 million (3Q22–2Q23) at a 60% margin. Roku’s platform revenue grew to $2,777 million (3Q22–2Q23) and its platform profits to $1,510 million at a 54% margin.
Rua Aguete will also point out that Amazon’s ad-supported Prime Video will spearhead a new wave of shoppable TV in 2024. Ad-supported Amazon Prime could make over $2 billion in ad revenue in 2024 and could leapfrog Netflix, Paramount+, and Peacock to become the second-largest hybrid OTT video service by ad revenue this year.
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