The FAST business and the challenges that represents for Free TV

Traditional pay TV providers in the United States, including market leaders like Comcast, AT&T, and Dish Network, lost a total of 5 million subscribers per year between 2019 and 2021, with another 5 million projected to cancel their subscriptions in 2022, according to data from media industry analysts.

As the cord-cutting trend continues in 2022, there is a fast-growing OTT business model that could be even more disruptive to the traditional pay TV business model: Free Ad-Supported Streaming TV, also known as FAST. In a recent blog, SymphonyAI Media explored the ins and outs of the FAST streaming model, why FAST platforms are continuing to attract a growing audience, whether free ad-supported streaming can beat traditional TV, and how content owners can start monetizing their assets on FAST platforms.

●  WHAT IS FREE AD-SUPPORTED STREAMING TV?
Free Ad-Supported Streaming Television (FAST) is an OTT content distribution business model that allows audiences to stream linear television content for free over an Internet connection. FAST video platforms are free streaming services that earn revenue by serving advertisements as audiences consume their content. While ad-based video on demand (AVOD) allows audiences to access television and video content from a library, FAST services stream content in linear channels that are more similar to traditional TV.

FAST service providers acquire video content for their platforms by purchasing it, or by entering into licensing agreements with content owners. Content licensing agreements give the FAST service provider rights to stream television or video content in exchange for a flat licensing fee or a share of advertising revenue. Media companies of any size can monetize their content by licensing it to a FAST service provider, though some large media production and distribution companies have developed or acquired their own FAST video platforms to better monetize both new and legacy media assets.

●  WHY DO AUDIENCES LOVE FAST?
First of all, FAST streaming is free. In the post-pandemic world, high inflation rates are putting the squeeze on household budgets in America, causing a noticeable increase in cord-cutting. But while cable TV subscribers are paying hundreds of dollars every month for services, FAST platforms offer a similar viewing experience with no monthly fees (except for maintaining an Internet connection).

Moreover, there are fewer ads than in pay TV. A recent study from Deloitte found that too much advertising is pushing consumers away from traditional cable and satellite TV onto other platforms. According to the study, 8 minutes of ads per hour is the sweet spot for consumers, while 16 minutes of ads per hour will trigger most audiences to stop watching. On cable TV, some channels are delivering 20 minutes of advertisements per hour. On a FAST platform, it is more common to see 2-5 minutes of ads per hour.

At the same time, FAST services tend to be more convenient to watch. Traditional pay TV requires a cabled connection to watch, so subscribers can only access their services when they are at home. Meanwhile, FAST streaming platforms can be accessed on any device with an Internet connection, including a mobile phone, laptop, or a tablet computer.

In fact, analysts estimate that there are now 500 million connected devices in American households that can be used to watch TV, a number that includes more than 100 million Connected TV or Smart TVs that support access to FAST and other web-based video streaming services, plus nearly 300 million mobile phones. The accessibility of FAST platforms means that viewers can tune in from just about anywhere.

Another advantage is the access to niche, branded and original content. FAST service providers are seeking to broaden their appeal for audiences by acquiring niche, nostalgic, and branded content to stream on their platforms. That includes old movies, television shows, and cartoons, niche sports, and entire FAST channels dedicated to niche interests like home decor, true crime, nature, and even the supernatural.

●  CAN FAST REPLACE TRADITIONAL PAY TV?

With the cord-cutting trend continuing to pick up steam and the growth and proliferation of FAST services, content owners are wondering whether FAST could replace traditional pay TV as the most popular business model for distributing video content in a linear format.

In terms of revenue, despite a ten-year trend of declining viewership, pay TV continues to out-earn competing content distribution models by a significant margin. While all FAST services in the United States generated an estimated US$2.6 billion in ad revenue during 2021, traditional pay TV services earned US$69.9 billion through advertising and another US$85 billion from subscription revenue. Free ad-supported streaming video services are projected to generate US$6.1 billion annually by the year 2025, but it will likely take multiple decades for FAST service providers to start generating more revenue than traditional pay TV – if it ever happens at all.

Regarding viewers, in 2022, FAST platforms are experiencing exponential growth and attracting bigger audiences than ever before. For example, FAST platform Tubi TV announced in the first quarter of this year that it had 51 million monthly active users – up from 33 million in the fourth quarter of 2020. Meanwhile, Pluto TV went from 12 million monthly active users in 2019 to 64.4 million monthly active users today. For reference, the number of cable television subscribers in the United States peaked in the year 2014 at 100.5 million and is now at 74 million.

“While it is true that free streaming services are growing rapidly and pay TV subscriptions are declining in 2022, it is far too soon to announce that FAST is replacing pay TV. With millions of subscribers, high ARPU, and strong revenue numbers, pay TV will continue to exist as a highly profitable business model into the foreseeable future. At the same time, large media companies are entering the streaming marketplace and hoping that new FAST or SVOD subscribers can replace the ones they are losing in linear TV. FAST streaming platforms will continue to develop and acquire content, refine their advertising models, and expand their audiences to enhance their appeal for advertisers and grow revenue,”  SymphonyAI Media’s report concluded.