Spending on connected TV (CTV) in the United States continues to grow just as streaming's share of overall US TV consumption surpasses that of cable. Lower summer TV viewership and an annual lull in major sports broadcasts impacted the timing of this milestone, but the long-term trajectory is clear.
CTV gains will continue as viewers of all ages grow accustomed to Over-the-Top (OTT) distribution. Three emerging trends will play increasingly prominent roles in this broad transition to streaming-based viewership. Each will deepen consumer ties to CTV and further solidify the pandemic-era boom in CTV ad spend.
A New Era in Sports Rights
Sports, particularly the NFL, and a dwindling number of live events retain the ability to draw large linear TV audiences. This fuels linear TV’s share of ad budgets, many of which are committed during Upfront negotiations. Sports rights also help broadcasters stave off or delay further audience attrition. The long shelf lives of major sports rights will preserve this dynamic for some time. However, the trend among new deals favors exclusive streaming packages.
The practice of including streaming rights in cross-channel packages is not new. Amazon’s Thursday Night Football deal, the league’s first all-streaming rights agreement, pushed the envelope further. Amazon is now the exclusive home of Thursday Night Football through to 2033, broadcasting 15 TNF games this season. The marketplace took a cautious approach to Amazon’s initial audience estimates, but the first few weeks of the young NFL season showed TNF’s streaming audience could largely replicate previous years’ broadcast viewership.
Major League Baseball also offered up some of its rights to streaming packages this year. The vast majority of MLB games still air on linear TV, but Peacock and Apple TV’s packages are a sign of things to come. What we’ve already seen with the NFL, MLB, and other rising leagues like the MLS will set a precedent for other major sports rights to include exclusive streaming components. These packages will pull audiences with them and expand CTV’s growing reach and scale.
Consolidation of Streaming Platforms
Today’s OTT LUMAscape, consisting of more than 200 global streaming services, is undeniably fragmented. Acquisitions and consumer desire for budget-friendly bundles and ad-supported tiers will eventually alter this bloated status quo. We are already starting to see signs of consolidation, with Warner Bros. Discovery announcing plans to merge HBO Max and Discovery+ in 2023.
We expect to see streaming platforms replicate a walled garden approach—pulling owned content within their walls and in some cases launching their own self-service platforms—as other services consolidate. This will result in ad-tech complications, but the more streamlined consumer-facing ecosystem will make it easier for premium services to amass subscribers and encourage consistent usage.
Subscription vs. Ad-Funded Models
Ad-supported streaming is closing the gap in time spent and gaining share of overall streaming versus subscription-only models. The inflationary economic environment is already accelerating the adoption of lower-cost ad-supported tiers. Netflix and Disney+, which are both scheduled to launch ad-supported tiers in coming weeks, are the latest and most notable examples.
Even modest adoption of these ad-supported tiers will expand available ad-supported CTV inventory given their robust subscriber bases. Certain audiences will always be willing to pay for top-tier ad-free experiences, but we will likely see a growing preference for a hybrid market. This will place greater emphasis on pre- and mid-roll video than once thought likely.
Looking to the future
Linear TV remains an effective medium and will attract the majority of U.S. TV ad spend for several years. This is not without good reason. However, the expected shift in future sports rights, likely platform consolidation, and the role of ad-supported tiers in hybrid models will steer the biggest factor of them all: video consumption.
This momentum, in tandem with the continued maturation of CTV ad tech and attribution, makes current predictions of a doubling in US CTV spend through 2026 not just plausible, but likely. CTV will account for almost all of the U.S. TV market’s growth during this time and will further accelerate the transition to a streaming-based video marketplace.
