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Can VOD Services Survive Without Ads?

VOD service providers have a problem. Adverts increase revenue, but they drive away viewers. So can VOD survive without ads?

Video on demand (VOD) services seem to be in vogue, with the most successful VOD companies even acting like traditional broadcasters and creating their own big-budget series (think Orange is the New Black and House of Cards).

That said, VOD platforms are perhaps not as popular as you may have thought. In fact, in the UK, broadcaster VOD accounts for only 2.9 percent of overall TV viewing.

VOD services and ads

But the demand for VOD is rising, and fast: in its Communications Market Report 2014, Ofcom found that unique programming requests for “long-form” VOD had increased by 38 percent between the second half of 2012 and the second half of 2013 (which is the most recent data available).

And it’s no surprise. Viewers love being able to watch shows at their convenience, catch up with shows that they’ve fallen behind on, and “binge watch” their favourites.

But there’s one thing viewers don’t like about VOD, and that’s the ads. In fact, many are attempting to circumvent watching them by installing ad blocker software (around 144 million of them to be precise).

The Ad Problem

That viewers dislike adverts so much is a huge problem for VOD service providers since many of them operate a business model that depends on them (unless, of course, you’re the BBC). And, since more and more viewers are installing technology that helps them avoid watching ads every day, it’s becoming much harder for VOD platforms to sell their advertising slots.

Hulu, 4OD, ITV, and others have embarked on a war against ad blocker software, and have attempted to restrict the content they broadcast if they detect that ad blocking software is present – a situation that may only fuel the creation of ever more sophisticated ad blocker technology.

This has led to others, like Netflix, who don’t, a la the BBC, have the luxury of being able to broadcast content for free, to opt to go down the subscription route and cut out the need for adverts all together.

This approach has proven to be an extremely popular one, and the company now boasts over 33.42 million subscribers (according to Statista) and a customer satisfaction rate of 81 percent (which is pretty good!).

It seems, then, that people are willing to pay not to have to watch adverts; the combination of quality television, no adverts, and a reasonable price ($7.99 or £6.99), makes for very happy viewers.

So why are Netflix – and other subscription VOD companies – toying with the idea of introducing adverts?

Subscriptions and Ads?!

The truth is they’re not. Well, not unless they’re mad. The rumours that Netflix were to introduce ads, like many things, spun out of control thanks to the internet.

What Netflix is proposing is introducing adverts to promote their own material (in much the same way as the BBC does). “We are not planning to test or implement third-party advertising on the Netflix service,” the company told Mashable. And that’s good, since, if they did, they’d see their user-base decline very quickly.

Viewers hate ads, and will pay not to watch them. The question is not whether VOD will survive without ads, but how long will those platforms that continue to incorporate ads last?

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