The dream of cheap, ad-free streaming TV is dead

WHEN William Millsap heard Amazon was going to show advertisements on its Prime streaming service unless he paid an extra US$2.99 a month, he cancelled his membership. An occasional television watcher, Millsap already has access to Netflix, Hulu and Max and says he has gone too long without ads on his shows to turn back now. The company refunded most of his annual fee.

“I’m just at a stage in my life where I try to be mindful about what I do, and constant interruptions just wear me out,” says Millsap, 66, a retired Episcopal priest in Reno, Nev.

Amazon starts showing the ads to all Prime Video users on Monday. For some viewers, it is one more sign of the end of an era for streaming. They are rethinking how many services they can pay for, and how many ads they are willing to tolerate.

For years, streaming services distanced themselves from the trappings of cable television — high bills, a glut of low-quality shows and channels, constant commercials. In addition to ads, the content bloat is back, ‘bundles’ of different services are becoming standard and paying for all the big options easily rivals cable in cost.

Most major streaming apps have embraced ads as another way to make money. Streaming companies claim their ad-based options as a budget-friendly way to watch, while simultaneously increasing the costs of their premium subscriptions. Apple TV is one of the few streaming services that does not offer thirdparty ads, yet.

Amazon’s tack — making people pay more to get rid of the ads — could anger consumers.

“They’re offering no additional value and simply forcing ads on consumers,” says Mike Proulx, a research director at Forrester.

“Consumers in effect are losing out on this move, and it’s all Amazon’s gain.”

That’s part of what rubbed Millsap, the former Prime subscriber, the wrong way.

“I think the worst business model is when we promise something and change the terms, and that’s what it feels like Amazon has done,” he said.

In a blog post announcing the change, Amazon said it was doing it to “continue investing in compelling content and keep increasing that investment over a long period of time.”

Making good television costs money. In addition to full seasons of classic shows and reality content, streaming companies need a handful of big-budget hits to retain viewers. The first season of HBO’s

‘House of the Dragon’ cost the company under US$20 million per episode to produce, according to Variety. Prime’s ‘The Lord of the Rings: The Rings of Power,’ was estimated to cost US$465 million for the first season alone, according to the Hollywood Reporter.

To cover the costs, streaming companies have been tinkering with subscription charges and other changes. Almost every streamer has raised its non-ad streaming fees recently. Last May, Netflix started cracking down on account-sharing to turn some of the estimated 100 million people watching without paying into revenue. Other companies are expected to follow its lead.

“With the exception of Netflix, most of the other major streaming platforms are not yet profitable,” says Proulx.

“They’re forced to have to chase other revenue streams and advertising is a long-standing business within entertainment. It is proven and shown to work.”

It’s not only streaming. Ads are making a comeback in other tech products that didn’t start out that way. Uber is using its app to show ads to people waiting for or riding in its cars. TikTok’s launch of TikTok Shop has given the app a mall-like feeling with a tab dedicated to selling random goods and videos of people selling things themselves, with worrying results. Even Amazon’s Alexa voice assistant includes ads.

Some streaming viewers take issue with the quality of advertisements and how little they’ve changed since cable. Streaming platforms can have fewer ads so they repeat the same ones — and their timing, especially in movies, can seem random and jarring.

Proulx says the streaming ad industry is young and will likely have to find more ways to innovate, like the still ads that appear when you hit pause on a show.

There is one difference between streaming and traditional TV’s approach to ads. For now, Prime will not show ads on children’s profiles or on children’s content, says Amazon. Netflix also keeps ads out of its kids profiles. — The Washigton Post