FAST and the future of ads on streaming TV

Earlier this month, Amazon Prime Video announced that it would be adding advertisements to its movies and TV series starting in 2025 in an attempt to alleviate content expenses, leading to much uproar across the market.

With its decision, the platform joined the ranks of other streaming services that have announced newer ad-supported tiers while driving up prices of 'ad free' categories.

Netflix and YouTube with its "Premium Lite" have already introduced these changes abroad and are expected to bring them to India, while local streaming players offer much of their content at FAST (Free Ad-supported Streaming TV) even as JioCinema and Hotstar already offer ad-supported plans.

However, with ad-free plans becoming more premium one can't help but wonder whether the value proposition of FAST is becoming seemingly skewed. Is advertising inevitable, with the final iteration of ad-free viewing available only at an ‘ultra super duper special’ premium tier?

Industry experts suggest that this shift towards ad-supported models reflects a broader transformation in consumer behavior and market dynamics. According to Nikhil Kumar, Chief Growth Officer of mediasmart by Affle, the FAST category is experiencing remarkable growth, particularly in the APAC region, which has seen a 113% increase in viewing hours year-over-year.

“This trend not only reflects a shifting preference towards ad-supported models but also highlights that viewers are willing to wait for shows on FAST services instead of opting for paid subscriptions,” notes Kumar, adding that this shift reflects a broader trend where viewers are transitioning from linear to digital platforms seamlessly, seeking value without the burden of subscription fees.

According to Statisa, revenue in the OTT Video market is projected to cross US$4 billion in 2024, and expected to show an annual growth rate (CAGR 2024-2029) of 7.43%, resulting in a projected market volume of US$5.81bn by 2029. In the OTT Video market, the number of users is expected to amount to over 634 million users by 2029.

Mihir Mehta, Managing Partner at 0101.Today, says, “Yes, I feel advertising in OTT is indeed becoming inevitable, following a trajectory similar to TV. Initially, HD content on TV was ad-free, but monetization quickly crept in, and we’re seeing a parallel shift in streaming. OTT platforms have accustomed viewers to premium content, and now even at premium tiers, ads are becoming acceptable. Today’s tiering seems more content-focused and quality-focused (HD, 4K) than ad-free-focused, with ads integrated across most levels.”

The evolution appears to be driven by multiple factors, including rising customer acquisition costs and plateauing subscriber growth, making advertising essential for platform sustainability. Prabhvir Sahmey, Senior Director - Ad Sales - India at Samsung Ads, points to a growing ‘subscription fatigue’ among viewers globally. A TV Advertising Engagement Study by Samsung Ads reveals that over 81% of Indian consumers find it acceptable to watch advertisements if the content is free, provided the ads are relevant.

“FAST bridges the gap between linear and streaming,” explains Sahmey. “Viewers are fairly invested in VOD content, so are less forgiving about the disruption to the viewing experience. However, FAST plays into the way we used to watch TV with scheduled channels, so it takes the hassle out of choosing something to watch.”

This shift in consumer behaviour has implications for both platforms and advertisers. “At mediasmart, we are strategically leveraging our partnerships to capitalize on the growing demand for ad-supported content. Advertisers now can now identify and engage the right audiences based on content affinity, allowing them to target specific genres like entertainment, news, and more,” shares Kumar.

As Deepak Sonpar, Managing Partner at EssenceMediacom India, explains, “For TV channels and video platforms, relying solely on subscription revenue is becoming increasingly challenging.” He identifies three distinct consumer segments in India, with platforms needing to cater to what he terms “middle India” - a segment that may not be able to afford incremental payments for entertainment.

The future of streaming in India appears to be heading towards a dual model. “Looking ahead, I believe we will see a dual model emerge: one tier that is paid and ad-free and another that is ad-supported,” predicts Sonpar, adding, “Consumers will choose between these options based on their time spent on the platform, the quality and relevance of content, and their co-viewing preferences on connected TVs.”

However, the success of this model depends heavily on the execution of advertising strategies. Kumar emphasizes the importance of non-intrusive, well-targeted advertising, opining, “The idea isn't just to insert ads but to deliver meaningful, relevant content that enhances the viewing experience rather than detracts from it.”

This is particularly evident in the success of newer formats, with Sahmey noting that “viewers are warming up to ad formats that feel non-intrusive and at the same time, allow for discoverability and engagement, particularly evident with the success of shoppable and interactive ad formats on CTV.”

As the streaming landscape continues to evolve, transparency and value communication become crucial. “Platforms and advertisers need to tread carefully to avoid alienating a consumer base that initially bought into ad-free promises. Transparency is essential; when introducing ad-supported tiers, platforms should clearly communicate the added value for viewers,” Kumar emphasizes.

Mehta admits it is difficult to balance user expectations with revenue goals and can be quite challenging, but offering diverse bundles can help. However, he adds, “It’s also key to remember that ad frequency on OTTs remains significantly lower than on traditional TV, with ads being more personalized and relevant to viewers. This distinction could help OTTs maintain a better experience while ensuring that ad-supported tiers remain viable for revenue growth.”

Platforms need to clearly articulate how ads help subsidize content and broaden viewing options. Kumar suggests offering flexible subscription models where consumers can choose their ad tolerance, while maintaining a focus on user experience through relevant ads and premium content.

The transformation of streaming services reflects a broader industry adaptation to changing consumer preferences and economic realities. While ad-free viewing might indeed become a luxury option available only in high-end premium tiers, the growing acceptance of ad-supported content, coupled with innovations in ad delivery and format, suggests that FAST and similar models will play an increasingly important role in India's streaming future.