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Stan, Netflix and Presto all likely to eventually allow video advertising

Brownlow

Brownlow

The new ad-free subscription vidoe streaming services launching in Australia may be tempted to abandon that position with the lure of advertiser dollars amid a continued shortage of online video ad inventory according to one PwC analyst.

On Wednesday Nine Entertainment and Fairfax Media’s joint venture StreamCo announced its consumer brand called Stan, which the streaming company said would be built around the principle of ‘No ads: No lock-in contracts’ similar to US rival Netflix.

“There are going to be two revenue streams,” said Megan Brownlow, editor, Australian Entertainment and Media Outlook at PwC. “Something like Stan might initially say it won’t have advertising but when you look at the growth in video advertising, which we are forecasting to grow at 36 per cent per annum for the next five years, it will be hard to turn that down.”

“We have a shortage of video ad inventory and it is very highly sought after. I don’t have any special insight into their strategy, but I think they are smart enough to be fluid.”

Brownlow argued that the current stance was helpful especially amid the impending marketing war that will see Foxtel’s Presto face off against US streaming giant Netflix and StreamCo’s Stan for market share in the video streaming space.

“It sends a good message initially not to go with advertising,” she said. “Get people on the platform first and then from a strategic point of view you can do what is called emergent strategy rather than trying to do a five year plan.”

When asked if there would be any flexibility on Stan’s position Nick Forward, content director for Stan, said: “Stan is about simplicity, entertainment and transparency.  Stan will have no ads and no lock-in contracts.”

Overseas the various streaming platforms have different positions on video ads, with Netflix not pushing ads to subscribers while rival service Hulu pushes out ads on both its free services and premium product Hulu Plus.

Earlier this week, StreamCO CEO Mike Sneesby said business had a three to five year business plan for establishing itself.

“We want hundreds of thousands (of subscribers), we have said three to five years is the timeframe but it does come down to what happens in the competitive landscape,” he said.

“Competition in the market will do two things in the short term. It will potentially increase the need to spend on content, we have a business plan that has multiple different trajectories and depending on which one we choose there is a different level of spend and content that we think we are going to have to make to deliver a brilliant product to the Australian consumer.”

Sneesby indicated that the main variables would be around their expenditure side, specifically on content acquisition rights and marketing.

“The other variable is on marketing if we are competing aggressively, in the short term, it will drive up the cost of marketing,” he said. “In the long term it grow the market and will change the shape of the cost per acquisition curve.”

It has been a big week in the online streaming space with news emerging that US streaming behemoth Netflix is also preparing its Australian launch appointing agencies, ahead of an expected $20m+ marketing push.

Nic Christensen 

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