Amazon Prime Video, known for its ad-free streaming experience, is set to introduce commercial breaks early next year, marking a significant shift in its approach.
This move aligns Amazon with other major streaming platforms like Disney+, Netflix, and Warner Bros. Discovery’s Max, which have already adopted ad-supported tiers. Tim Hanlon, CEO of Vertere Group, points out that aggressive monetization efforts have historically driven the TV industry.
Amazon has stated that it intends to feature fewer ads than traditional broadcasters or broadband rivals, with an approximate benchmark of four minutes of ad time per hour on the streaming platform. Initially, commercials will roll out in the U.S., U.K., Germany, and Canada in early 2024, followed by France, Italy, Spain, Mexico, and Australia later. For those who prefer an ad-free experience on Amazon Prime Video, this option will still be available for an additional $2.99 per month in the U.S., on top of the annual subscription to Amazon’s overall Prime service.
Notably, this shift comes as the media sector increasingly recognizes streaming video as the future of entertainment. Companies like NBCUniversal and Apple have been racing to provide a wide range of content to cater to audiences moving away from traditional broadcast or cable TV. However, this transition comes with significant costs, involving substantial investments in content creation and infrastructure. Investors are now keenly interested in when these ventures will become profitable.
Even stalwarts like Netflix, which had long resisted the inclusion of commercials, have felt the pressure to consider advertising as a revenue source. Amazon justifies this decision to sustain investments in compelling content over an extended period. Their acquisition of MGM Studios for $8.5 billion in 2021 and securing the rights to the NFL’s “Thursday Night Football” demonstrates their commitment to content excellence.
Historically, major media companies like Disney have thrived on dual revenue streams: advertising and subscription fees from cable and satellite providers. Initially launched with minimal or no ads, streaming services have disrupted this revenue model. Tim Hanlon emphasizes the ideal media business model as one where revenue is generated from both subscribers and advertising.
While Amazon already incorporates ads in its Freevee service, which allows users to access content in exchange for ad views, this move into Prime Video signifies a significant shift. The addition of commercials on streaming services could lead to concerns about increased ad frequency, mirroring the trends seen on traditional TV networks. Hanlon anticipates that commercials in streaming environments may become more prevalent over time, with larger ad loads and additional opportunities for advertisers.
Ultimately, as streaming platforms increasingly embrace advertising, it will be crucial for companies to manage the flow of commercials effectively. An excessive barrage of ads should not taint consumers’ perception of streaming media. Hanlon cautions that while advertising can address specific issues, it may inadvertently exacerbate others. Apple TV+ is an exception, choosing not to include ads in its scripted programs.