Media

Entertainment companies eye free, ad-supported tiers to boost growth

Discovery Inc. CEO David Zaslav, who will lead Warner Bros. Discovery once their merger is complete, says free is an important part of the funnel.
article cover

Disney

· less than 3 min read

Get marketing news you'll actually want to read

The email newsletter guaranteed to bring you the latest stories shaping the marketing and advertising world, like only the Brew can.

Legacy entertainment giants that first built ad-free, subscription-based streaming services that were modeled after Netflix are increasingly eyeing another path to growth: free TV.

The soon-to-be merged WarnerMedia and Discovery are just the latest to consider it. Discovery, Inc. CEO David Zaslav told investors that by combining the subscription services Discovery+ and HBO Max, the company could create “a subscription-only service, an ad-light service, and then a free digital service.”

Zaslav, who has been tapped to lead the merged company that will be known as Warner Bros. Discovery after it closes in the second quarter, said that a free digital service could help the combined companies extract value from less-trafficked content on their subscription services.

“There’s a load of people that will never pay for television, but they can go and view this content, and that’ll be advertiser-supported,” Zaslav said. “I think there are a number of players that are very tied to this idea of subscription only.”

Déjà vu: Paramount (formerly known as ViacomCBS) has long touted a three-funnel strategy as core to its streaming ambitions, with the free service Pluto TV commanding more than $1 billion in advertising revenue while serving as a marketing vehicle for Paramount+, which has ad-supported and ad-free tiers.

NBCUniversal has also taken a similar approach with Peacock, which has a free tier as well as two paid ones that come with additional content offerings. Meanwhile, entirely free, ad-supported services, including Tubi and Roku, are investing in original content to attract audiences.

No, I don’t want no subs: Executives are warming up to free tiers as evidence of subscription fatigue continues to grow. While more than 80% of US consumers subscribe to at least one paid video-streaming service, an increase in cost was the most likely reason why consumers would consider canceling a subscription, according to Deloitte. Meanwhile, about 55% of consumers already use one free, ad-supported video streaming service, Deloitte found.

And, advertisers are increasingly eager to spend across streaming. Global connected-TV ad spend is projected to rise by nearly a quarter in 2022, to $20.3 billion, according to a recent estimate from GroupM.—KS

Get marketing news you'll actually want to read

The email newsletter guaranteed to bring you the latest stories shaping the marketing and advertising world, like only the Brew can.