In this opinion piece, Harry Packshaw, Head of AV at Havas Media Network, examines whether Prime Video's ad launch is leading to a new era for commercial TV. Are we seeing the beginning of the end for traditional broadcasters?

In an era where streaming giants are reshaping the television landscape, Amazon's Prime Video has thrown down the gauntlet with its recent ad-supported tier launch in the UK. Unlike Netflix and Disney+, which sweetened its ad offerings with discounts, Amazon has taken a more audacious approach by migrating all its subscribers to the ad tier, offering an ad-free upgrade at a premium. Six months in, with BARB data indicating that over 68% of its 36 million Prime Video users remain on the ad tier, the success of this move is already challenging the notion that viewers are completely averse to advertising. But it also raises a critical question: is this new approach the beginning of the end for traditional broadcasters? Or will they find a way to coexist?

A shift in strategy

Netflix has now changed tack and simplified its tier structure, removing its ‘basic’ package (the lowest-cost ad-free tier) for new customers. In May, the company transitioned all existing basic subscribers to its standard ‘with ads’ tier. But with many Netflix subscribers already signed up to higher-cost plans, BARB data shows that only 17% of their 42 million UK users are currently accessible to advertisers, although that number is rising. For Disney+, that figure is even lower, believed to be just a fraction of its 28 million users available for ad targeting (though with BARB not yet measuring its ads tier and Disney yet to publish any figures, it’s hard to know for certain).

On the surface, the decision to forcibly move customers to ad-supported tiers could have angered subscribers. Yet, most appear comfortable with this value exchange. According to BARB’s establishment survey, Prime Video’s total subscriber numbers increased by 2% quarter on quarter in Q1 and a further 5% in Q2. Netflix also saw a 2% uptick in Q2 subscribers. While some of this increase may stem from subscribers returning after cost-of-living tightening, BARB indicates that the monthly reach of each platform has remained consistent since it began tracking this data in August 2022.

The impact on traditional broadcasters

Speaking of reach, in May of this year, Prime Video, buoyed by the release of Clarkson’s Farm, achieved its highest monthly reach of the year, capturing 51% of all UK adults, according to BARB data. Netflix, benefiting from its own hit, Bridgerton, reached 64%—one of its biggest years to date. In contrast, during the same month, BARB data shows that ITVX and Channel 4’s streaming platform reached just over half of Prime Video’s audience (26% and 23%, respectively), with Sky (including NOW) only managing a quarter of this (14%).

While Amazon’s and Netflix’s numbers encompass both commercial and non-commercial viewing, it’s reasonable to assume that Prime Video's commercial reach exceeds that of traditional broadcasters, particularly given its extensive ad-supported customer base. Netflix’s commercial subscriber base is also on the rise, suggesting it may not be far behind.

Should broadcasters be worried?

Competition from subscription VOD services is nothing new; the proliferation of these platforms has been a key driving force behind the decline of linear TV. Interestingly, broadcasters have often been at the forefront of this evolution, with Channel 4 launching its streaming platform, 4oD, back in 2006— when Netflix was still a mail-order DVD rental service not the streaming powerhouse it is today.

However, these SVOD services have the potential to propel investment in television forward. Whilst traditional broadcasters will be keen to protect their market share dominance, the commercial opportunity is undoubtedly getting bigger. As Thinkbox CEO Lindsey Clay remarked when Amazon, Netflix, Disney+, Warner Bros. Discovery, and Vevo joined Thinkbox in February, “Commercial TV is growing and stronger together.” 

It’s essential to remember that while streaming is the future, it still represents only a part of broadcasters' commercial viewing right now. Despite declines in linear TV viewing, it remains significant in the UK. Even among younger audiences, BARB data shows that the average weekly reach for 2024 is projected to exceed 50% for those aged 16–34. Additionally, the average weekly combined reach of linear and non-linear viewing for each broadcaster is greater than Amazon's monthly average and nearly matches Netflix's total monthly average (including all its non-commercial viewing).

Implications for advertisers

This healthy competition is driving TV forward in ways that benefit both viewers and advertisers. Since its launch in December 2022, ITVX has seen average monthly reach increase by 15-20% among broad adult, upmarket, and young audiences, while average viewing minutes for the same demographics have more than doubled during the same period. It’s difficult to argue that ITVX’s success would have been as pronounced without the competitive pressure from Netflix et al. Similarly, Channel 4, with its digital-first Fast Forward strategy, and Sky with its launch of Sky Stream, have also been compelled to innovate and evolve in response to the changing TV landscape.

Moreover, Amazon, Netflix, and Disney are fueling the production of high-quality commercial content in the UK. While exact figures are hard to pin down, their combined investment in content globally is projected to exceed USD$60bn (£45.75bn) for 2024. Though not all of this content will reach UK screens, Netflix is set to release the final season of Stranger Things, and what advertiser wouldn’t want to align their brand with such a cultural phenomenon?

Despite its challenges, there’s no denying that Amazon’s launch of its Prime Video ad tier has catalysed both the commercial SVOD market and the broader TV industry in the UK. With shifts already taking place – such as Thinkbox’s inclusion of SVOD platforms – it seems that traditional broadcasters are ready to do more than just coexist in this new TV world, leading to even more choices for viewers and opportunities for advertisers. As the landscape continues to evolve, the interplay between SVOD services and traditional platforms will be pivotal in shaping the future of television. This isn’t the beginning of the end – it’s the end of the beginning.