As advertisers begin to focus on digital spaces, what does this mean for media companies and how will they make that adjustment? What does it mean for the overall media landscape?
University of Michigan Ross School of Business marketing professor Marcus Collins joins Wealth! alongside Yahoo Finance senior reporter Alexandra Canal to discuss how streamers are doubling down on advertising.
Collins says that customers are turning to streaming due to its lower cost and content selection. They also aren’t as locked into a subscription, so it allows customers to switch between services when they want.
Collins adds, “I think that marketers and brands underwrite everything, right?… The irony of all this is that the streaming model is essentially getting closer to a cable model, just augmented with the agency of allowing subscribers to put up more money to circumvent the ads, or to say, ‘I’m going to take the ads so that I don’t have to pay.’ Essentially, what this is getting to is the closer and closer we get to providing consumers more agency, more flexibility, and more freedom, the business models that are built for that will be the ones that essentially will win out in the end.”
Watch the video above to hear what Collins says about more streamers adding live sports.
For more expert insight and the latest market action, click here to watch this full episode of Wealth! And be sure to check out more from Media, Streaming, & Investing: What’s Next.
This post was written by Nicholas Jacobino
Video Transcript
Despite consumers seeing a wave of price hikes in their streaming accounts over the last year, companies are also doubling down on cheaper options.
Streaming giants like Netflix, Hulu and Disney Plus are all pushing ad tier options as users look to cut costs.
But what does this mean for the broader media landscape?
Marcus Collins, University of Michigan, marketing professor and author of or the culture joins us now alongside Yahoo Finance’s Alexandra Canal Mar.
It’s great to have you here with us.
I mean, let’s dive right in as we’re, we’re thinking about the different ad tiers and where streamers are trying to be very specific about their offerings towards to consumers, where are consumers gravitating towards some of these options and in what types of content as well?
I think they’re being driven by cost for sure.
There’s a cost sensitivity there.
But there’s also a sense of where are my shows, right?
So the premium content that’s more aligned to the shows I like to consume, that’s where I go.
And unlike cable, where you’re locked in over time, people go, I will have this subscription or this this offering until my show is done.
Then I’ll cut bait and go somewhere else.
So there’s just a ton of dynamism in the marketplace that we see when we look at the numbers, uh that, that are, that are projected and are realized with regards to how viewership is going up and where people are, are, are, are putting their money.
Hi, America.
It’s great to see you again.
Do you think advertising will continue to be a growth driver in the long term?
Because we’ve certainly seen the potential baked into the stock prices like a company like Netflix, for example.
But could there be a subscriber shift at some point?
And could we see perhaps some disappointment when it comes to the success of advertising?
I mean, I think that marketers and brands underwrite everything, right.
So it’s no surprise.
It’s interesting.
The irony of all this is that the streaming model is essentially getting closer to a cable model, just augment it with the agency of allowing subscribers to put up more money to circumvent the ads or to say I’m gonna take the ads so that I don’t have to pay essentially what this is getting to is the closer and closer we get to providing consumers more agency, more flexibility and more freedom, the business models that are built for, that will be the ones that essentially will win out in the end.
Just as you can see, the numbers of linear TV continue to decline.
Also, what’s interesting is that we’re seeing this push for more sports and live events on streaming platforms.
How do you think that can impact advertising?
Well, I mean, we, we have been conditioned thanks to streaming to be less inclined to watch things uh synchronously, right?
We don’t have to be shoulder to shoulder, we don’t have to be watching concurrent and there are only a few moments in time where we want to concurrently consume a thing and that is sports full stop.
So as sports continue to sort of lean and tease and visit the streaming world, it creates more value for those places that was always sort of the holdouts that I’m not going to go fully offline.
I’m not going to fully cut the cord because I want to watch sports.
Well, if sports are going to be where I already am, then it creates a much more compelling offering when it comes to, to streaming and for marketers, they’re already investing money in sports as a sponsor.
Now, you’ve got the best of both worlds happening with regards to how they do their spin, they’re where the people are, they’re in the properties that matter most and they’re doing it while people are watching it concurrently.
Netflix is basically set itself as the standard activist campaign have even uh elucidated that where you have activists looking at Disney even and saying, why can’t you be more like Netflix?
And so who is the not just industry standard but best positioned from a margin perspective as well, even as they’re trying to squeeze out the most dollars that they can from consumers.
I think Netflix still remains in a powerful position.
Just look at the earnings.
I think it’s, it’s testament to that, but Netflix does a few things really, really well, they have a volume of content that oftentimes doesn’t require as much resources to make.
Right.
It’s far cheaper to make, you know, uh, a reality TV show that streams only on, on, on Netflix, like Love at first sight than it is to make a Mandalorian.
Right?
And since the, since Netflix has that kind of heterogeneity and their offering, they’re able to kind of hedge their bets with regards to where they’ll spend their money to realize the greatest margins.
Not only that the viewership is there, there’s so much content there that they create, uh, sort of a product market, better product market fit for, for consumers and they’re getting into the sports business with WWE, like they’re in all the places, doing all the things and sort of hedging their bets in the best ways possible.
