While companies look internally to streamline, they also need to look ahead to growth potential. Revenue is expected to increase each year of Outlook’s forecast period. As always, the increase is unevenly distributed, with some sectors stagnating while others soar. This outlook provides a roadmap to a number of attractive hotspots of growth opportunities. Some are detailed below.
Growth hotspot: advertising
Advertising is booming. As previously mentioned, advertising is set to be the first category to approach his $1 trillion mark. The United States, the largest traditional TV market, will reach a critical tipping point in 2023, when advertising spending will outpace revenue from cable TV and other subscriptions. In Australia and the UK, these two red lines have already been crossed.
A closer look reveals which components are growing the fastest. Over the next five years, revenue from ad-supported video-on-demand is expected to nearly double. Indeed, the streaming industry has transformed from an industry that promised to free paying subscribers from watching ads to one that relies on advertising as its core revenue source. And consumers are increasingly accepting advertising within streaming products.
Free Ad-supported Streaming TV (FAST) services are fully addressable digital networks of carefully selected channels, making them ideal for targeted advertising. Pluto TV, now part of Paramount, was one of his earliest companies. Device makers like Roku, Samsung, and LG are tapping into the growing connected TV market and leveraging streaming channels as a new revenue stream on top of their core business. Japanese conglomerate Rakuten operates its own platform and offers third-party channels. FAST’s audience skews younger than viewers of other online and pay-TV services. According to Omdia, in a 2022 survey, 45% of respondents in the US said they used FAST services when they were under 35 years old.
After eschewing ads for the first 25 years, Netflix launched an ad-supported tier at a lower price in certain regions in 2022, while gradually increasing the price of the ad-free version. In May 2023, Netflix announced that its ad-tier service had nearly 5 million subscribers. In the UK, free-to-air commercial broadcaster ITV has launched its new ITVX streaming service in December 2022. This allows viewers to choose between an ad-supported US box set or an ad-included subscription model, in addition to free access to recent and archived programming. The free stream is supplemented with content from StudioCanal Presents and BritBox.
