Power

Ad-supported video services are booming. Are free downloads next?

Even during shelter-in-place, interest in video downloads remains stable. Will free video services finally take notice?

NBCUniversal's Peacock on a laptop

Peacock, the streaming service from NBCUniversal, will restrict downloads to its ad-free tier.

Photo: Gabby Jones/Bloomberg via Getty Images

Penthera bills itself as the "download-to-go guys," the company that makes it possible for subscribers to Starz, Showtime and the like to download videos so they can watch them during flights and off-the-grid vacations.

So what happens when everyone stops flying and stays at home?

Penthera Chief Sales Office Dan Hurwitz says video downloads have actually gone up by 15% over the last few months as customers download content to their kids' phones and tablets so they can save their Wi-Fi for work-related Zoom calls. Eighty percent of those downloads are being watched while the device is online, suggesting that consumers are becoming more mindful about avoiding traffic peaks.

As a result, Penthera is now looking to reframe video downloads, moving away from the portability aspect and putting a bigger emphasis on network management. "Downloading to a mobile device has major benefits for a network operator," Hurwitz said. "We're just extending the edge."

Video subscription services like Netflix and Amazon Prime have been offering their customers mobile video downloads as an alternative to traditional streaming for years, and both Disney+ and Apple TV+ incorporated downloads at launch. But now Penthera is betting that its newfound success with stay-at-home downloads will help it to finally crack the code on free, ad-supported video downloads. "It used to be that download was this premium feature," said Hurwitz. Now, it's a must-have.

As consumers are defecting from pay TV to cut costs, free and ad-supported services like Pluto, Tubi and the Roku Channel have seen massive growth. Digital TV Research recently predicted that ad-supported video service revenue would grow 120% year-over-year, outpacing subscription video growth.

However, thus far, this crop of free services has shied away from downloads. That's in part because advertising has long been seen as incompatible with offline viewing. "Ad tracking is the issue," said former Viacom exec turned media analyst Andrew Rosen. "How do you verify if and when an ad ran and whether it ran without flaws? Who confirms that? It invites whole new levels of ad tech fraud."

Hurwitz argues that these challenges can be solved with technology; to track ad playback, Penthera uses beacons, which are cached locally in case a device is offline. What's more, ads for downloaded content are frequently refreshed. "We do that over and over again," he said.

There are some signs that ad-supported video services are starting to change their tune on downloading. Roku applied for a patent for downloadable ad-supported video content last year. (Asked about the patent, a Roku spokesperson declined to comment except to say: "We are always innovating.") And Hurwitz hinted at plans by a major media company to start testing ad-supported downloads this month, but he declined to comment further.

Still, some industry insiders expressed reservations in conversations with Protocol, wondering whether it was really worth the trouble. Rosen, for instance, pointed to licensing as another point of contention. Even Netflix, which first began offering downloads in 2016, still hasn't extended the feature to its entire catalog. Disney movies like "Mary Poppins" and "The Princess and the Frog" are among the titles that can only be streamed from Netflix.

Complications around licensing and ad tracking also seem to have turned off others. Hulu first announced two years ago that it would roll out "the industry's first ad-supported downloadable content experience," as ad sales executive Peter Naylor put it at the time. When Hulu finally added downloads to its mobile apps late last year, the feature was available only to subscribers to its ad-free tier. (A Hulu spokesperson declined to comment.) Peacock, the streaming service from NBCUniversal that's scheduled to launch on July 15, will also restrict downloads to its ad-free tier, Protocol has learned.

Still, Hurwitz believes that ad-supported video downloads are just around the corner: "You're going to see it happening in Q3."

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