Social distance and Tubi: How coronavirus affects ad-supported video services
Viewing is up, advertising will likely go down — but not all is lost for ad-supported streamers
With much of the country in mandatory lockdown, streaming hours are up across the board. And Netflix, Amazon Prime and Disney+ aren't the only beneficiaries of this trend. Ad-supported video services like Tubi and Pluto TV are also seeing big spikes in demand.
The boost in streaming comes just as big media companies have warmed up to ad-supported video services, which offer consumers free access to movies and TV shows on mobile devices and smart TVs, and are increasingly used by major studios as a way to monetize catalog content. Last week, Fox announced that it was acquiring Tubi, which launched in 2014 and positions itself as a kind of free Netflix, for $440 million. In February, Comcast acquired Xumo, which was founded in 2011 as a collaboration between Panasonic and Viant, for an undisclosed amount. And last year, Viacom spent $340 million on Pluto TV, which was founded in 2013 and is best known for its cablelike grid guide.
Right now, those look like prescient purchases, but looking ahead, the value of these acquisitions, and the prospects for ad-supported video in general, is less clear. Economic turmoil could significantly suppress ad spending. However, a looming recession could also further accelerate cord cutting and a move to free video, eventually benefitting the Tubis and Plutos of the world.
Streaming is booming
With 54 million kids out of school, and many more adults ordered to stay at home, it's no surprise that streaming services are seeing usage surge. Last week alone, streaming was up 10% compared to the prior week, according to data that smart TV data specialist Inscape gathered from 14 million connected TV sets.
Some of those eyeballs are going to the obvious players: major subscription services like Netflix and Disney+. Netflix's VP of networks Dave Temkin said during a webinar this week that the amount of viewing reached levels the company didn't expect to hit until this year's holiday season. "We effectively pulled forward our growth plans," he said. And when Disney+ debuted in several European countries Tuesday, it immediately clocked some 5 million app downloads.
However, viewers also increasingly turned to free, ad-supported streaming apps. In fact, smart-TV manufacturer Vizio told Protocol that usage of ad-supported apps on its platform was up 19% last week, compared to just 9% for all apps.
Pluto TV saw double-digit increases in viewing hours and active users over the past two weeks, according to a spokesperson. The service has especially seen interest in news explode: Viewership across its news category has been up 50% on average, Pluto's spokesperson said.
Tubi streamed a total of 42.4 million hours of programming last week, its CEO Farhad Massoudi told Protocol. "We have seen a huge uptick in users," he said. Total users were up 22% over the past two weeks compared to the two weeks prior, with new users up 50%.
Key advertisers are pulling back
For ad-supported services, viewership alone doesn't translate to revenue, and there is some cause for concern about the advertising market. Uncertainty over digital advertising has already led Twitter to withdraw its guidance for its fiscal Q1, and both Comcast and Disney have warned investors of the impact the COVID-19 crisis will have on their business, including advertising revenues.
Just like traditional TV, ad-supported video services count major automotive, travel and entertainment brands as some of their biggest clients. Appetite for new cars, cruises and movie premieres has vanished, resulting in a lot of uncertainty.
"The question we keep getting is what happens to advertising during a pandemic and ensuing recession," noted LightShed Partners analyst Richard Greenfield in a blog post. "The honest answer is, we are not exactly sure, especially given how hard it is to know how long the COVID-19 pandemic will last."
Massoudi agreed that the situation is fluid. "We are facing unprecedented times," he said. "Many businesses whose revenue relies on bringing people together physically in proximity [are] unable to operate." This had resulted in a pause on some advertising, he acknowledged.
"Others remain open for business," Massoudi said. "Some of those companies rely heavily on things like sporting events that are canceled or postponed, or news programming, where they might want less exposure in these heavy times. So while we have negative impact from some of our clients, we are also seeing some come in even stronger."
E-marketer analyst Jasmine Enberg struck a more pessimistic tone in an interview this week. "Even as we're spending more time, we are actually seeing advertisers start pulling back some of their spend on these digital platforms," she told Beet.tv. "I think this is going to negatively impact their revenues, at least in the short-term Q1 and Q2."
There have already been some shifts in connected TV advertising. Travel, movies, television and sports are all trending down, connected TV ad management platform Beachfront told Protocol. Categories like family and parenting, fast food and take out, pet care, elder care and distance learning have all seen growth. And in a sign of things to come, short-term loan ads are also up.
Acquisitions happened just in time
There could be some light at the end of the tunnel for ad-supported video platforms, as any downturn may speed up the industry's ongoing transition to digital. Consumers have already been turning away from traditional TV viewing and toward online video services, with 5.8 million subscribers defecting from cable and satellite TV operators in 2019 alone.
A recession could further accelerate that trend, as consumers look for cheaper alternatives to the $100 cable bundle. Free, ad-supported video services seem uniquely positioned to capture some of those defections. This may prompt advertisers who have thus far been loyal to traditional TV to finally make the jump.
Get in touch with us: Share information securely with Protocol via encrypted Signal or WhatsApp message, at 415-214-4715 or through our anonymous SecureDrop.
Tubi, for its part, was reportedly looking for new funding before it ultimately struck its acquisition deal with Fox. In hindsight, the timing of that deal — and the preceding acquisitions of Pluto and Xumo — may have been a godsend for the industry: Without strong corporate backing, these startups may have struggled during an economic crisis.
Their new corporate owners, on the other hand, will have a vested interest in seeing them succeed — if only as insurance policies against a further decline of their traditional TV business.