Viewers 250% More Likely to Pay $1 Premium than View Ads

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Report shows viewers would pay more to watch a movie show if they could watch it on their television, but didn’t have to watch embedded commercial advertising.

Everyone is suddenly trying out new business models when it comes to making content available for on-demand viewing. Content owners, advertisers and service providers are experimenting with how to attract viewers, yet get paid in the process.

So far, if a viewer orders a movie on demand from their television service provider the movie usually has no ads. Two factors come into play. First, viewers are assumed to react badly to ads if they are paying for the movie. Second, technology to dynamically insert current ads into the video stream is relatively new. When ads are included in today’s video on demand stream, they are “baked in” when the file is created. This means that an ad might be out of date. You can’t include ads like a “weekend sale,” for example.

But, some in the industry are beginning to question this pricing model. Witness the theater experience that often has advertising before the movie, even though the viewer has paid $10 for their ticket. The industry wonders if consumers would be willing to watch ads if it gave them a discount.

In a recent survey conducted by DIGDIA, viewers were given such a choice for viewing movies at home. It was a forced rank of the following – would they prefer it without ads for $3.99 or with ads for $2.99. They were also given the choice of watching it on their television or to download and watch it on their PC. Finally, they were given the choice of simply buying the DVD.

44% of the respondents picked watching the movie on their television without ads for $3.99. This was the clear winner.

Only 17% picked watching it on their television with ads for $2.99. Over 250% more people would rather pay an extra dollar just to avoid ads with their movie. In fact, more people picked buying the DVD over watching ads. 27% picked buying a DVD as their first choice. The PC viewing services ranked much lower. No surprise – the industry has long recognized that people prefer the television screen for movies, unless they are sitting on a plane. Only 9% picked downloading and viewing a movie on their PC without ads for $3.99. Just a mere 3% picked viewing the movie on their PC with ads for $2.99. Again, the survey shows a similar ratio between those that would pay more to avoid ads over those that would prefer a discount.

The controversy around on-demand viewing and advertising is just one of the issues several industries are wrestling with today. Some of the threats and opportunities in on-demand viewing may not be obvious, particularly if one looks only within their own industry. On-demand viewing is changing the entire digital entertainment value chain. Mix big money with change and smart leaders will spot opportunities. This is the subject of a recent report called Turmoil in On-demand Viewing Creates Opportunities, published by DIGDIA.

About DIGDIA

DIGDIA helps find growth opportunities, create winning business plans and strategies for companies in the digital entertainment value chain. Services include strategic consulting and market analysis with a balanced business & technical perspective. Reports about On-demand viewing, Digital Cable Ready, Digital Hollywood, Digital Cinema, Digital Consumer Electronics and other topics may be found at http://www.digdia.com.

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Gary Sasaki
DIGDIA
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