Streaming The Surprise Bargaining Chip In TV Ad Negotiations

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Many assume streaming services to be at the heart of all of TV's problems, including a lack of revenue generated from ads due to the lesser number of eyes on traditional TV than before.

However, that might not be strictly the case and certainly if the details in a new report are anything to go by.

According to the report, which credits "six people familiar with the tone of negotiations" for the information, the battle between TV networks and advertisers is only heating up, and the price advertisers are now expected to pay is only going up.

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In spite of the lost viewers, those with the information suggest networks are pushing for higher ad rates than ever before. In some cases, much higher.

This is not simply a means to generate revenue that would otherwise be absent due to lost subscribers, as advertisers could always simply opt to not continue to back an industry that would appear to be in decline. But therein seems to be the issue as those advertisers have nowhere else to go, and the TV networks know it.

This stems from the ad-free nature of streaming services. While many companies, including TV networks, are moving towards offering a streaming alternative, including ones that are bolstered by ads, the ad-free approach is in itself proving to be a selling point.

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This has equally led to many streaming services choosing to offer both access options. For example, both Hulu and CBS All Access offer the option of an ad-supported plan as well as one where the user pays more to completely remove the ads.

Even in the cases where an individual subscribes to an ad-supported package, they are usually sold as "limited commercial" plans and so there are less ad spaces available in the first place – even when ad spaces are available.

It would seem that although TV networks now know they are playing with a hand that involves less viewers, they are using the 'where else are you going to go' trump card to demand higher rates for the ads.

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In principle, advertisers are not only having to deal with the fact that it might have to pay more now for advertising on tradition TV, but it also has to account for a FOMO factor due to more advertisers now vying over the fewer primetime spaces that are available.

The result being advertisers finding themselves in the even more pressured situation that if they do not act quickly and pay the requested higher rates, they might lose out altogether on the sought-after spaces.

While this does seem to be the result of the market's current state of affairs, it is more a symptom of a market in transition than the actual market. Yes, advertising space is less in the streaming world, but many of those highly involved in streaming have been working on ways to increase ad viewing and engagement.

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What's more, as the number of streaming services are expected to increase beyond the current number (in spite of the rise of so-called 'subscription fatigue') advertisers will find they have even more advertising options becoming available.

Of course, in the meantime, it seems it might be advertisers who are losing out more on the rise of streaming than actual traditional TV.

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Editor-in-Chief

John has been writing about and reviewing tech products since 2014 after making the transition from writing about and reviewing airlines. With a background in Psychology, John has a particular interest in the science and future of the industry. Besides adopting the Managing Editor role at AH John also covers much of the news surrounding audio and visual tech, including cord-cutting, the state of Pay-TV, and Android TV. Contact him at [email protected]

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