The TV industry is full of acronyms – VOD, SVOD, TVOD, CTV, MVPD, AI, OLED, QLED, HD, UHD and so on. But the two dominating the headlines in the past year have been AVOD and FAST. AVOD (advertising-supported video on demand) and FAST (free ad-supported streaming TV services, a term coined by Alan Wolk) are, in fact, the only two ways to watch ad-supported TV beyond the set-top box.
The core difference between them comes down to content distribution, as AdExchanges explains. Streaming content can either be served on a one-to-many basis (as in live) or one-to-one basis (as in when you want it). Free ad-supported TV (FAST) apps offer linear channels that deliver scheduled programming to a mass audience through connected devices, while ad-supported video-on-demand (AVOD) is at the behest of the user, who initiates individual viewing sessions that generate inventory in which to serve personalized advertising.
FAST channels have been around in some shape or form for at least the last five years, but they have only recently become a mainstream revenue generation opportunity, an Omdia study released by Blue Ant International notes. “On a global basis, FAST channel revenue grew almost 20X between 2019 and 2022 and will almost triple to reach a value of more than $12bn by 2027. Much of this growth will be driven by the US which accounted for almost 90% of the global FAST channel market with a value of just under $4bn in 2022. By 2027, the US FAST channel market will exceed $10bn in revenue, making it an attractive destination for global IP and content owners looking to broaden monetization opportunities. Indeed, there is a significant opportunity to target diasporic audiences residing in the country. However, FAST channel revenue growth will be quickest outside of the US over the coming years, driving its share of global revenue down to 84% by 2027.”
Although all FAST channels behave like linear addressable, there is still no consensus as to whether FAST should be classified as linear or CTV (connected TV). Alan Wolk, the person who ‘invented’ the term FAST noted in one of his analyses: “Let me define what a FAST channel is NOT and that is the equivalent of a cable TV outlet like AMC or the Food Network. The reason for this is quite simple: while the free ad-supported streaming ecosystem is, in many ways, similar to cable television, it is also quite different in some very important areas. There are no MVPDs (multi-channel video programming distributor) in the FAST universe, companies that pay carriage fees to carry the singular national feed of a cable network. Instead, there are “aggregator apps” -- FAST services that collect and distribute content from a variety of sources. These aggregator apps have both curated linear channels and on demand libraries as they’ve found that consumers like the option of having both.”
Wolk defines three main types of FAST channels:
The first ones are the FASTs owned by the media companies: Pluto TV (Paramount), Tubi (Fox), Xumo (Comcast/Charter) and, for now anyway, Peacock (NBCU). The biggest advantages these FASTs have is that they are able to rely on unique content from their parent company, and they are not restricted to a single manufacturer or device.
The second grouping are the FASTs owned by the OEMs: Amazon Freevee, LG Channels, The Roku Channel, Samsung TV Plus and Vizio WatchFree+. Their key advantages are that they are the centerpiece of the device’s user interface, the first thing viewers see when they turn on the TV and they have access to a wealth of native ACR (automatic content recognition) viewing data.
The third group are the independent apps like Crackle and Plex. They are beholden to no one and thus can be more experimental in their formats and less constricted in their content offerings.
“FAST is the evolution of ad-supported streaming – which has been entirely on-demand until now – becoming the new linear [as in, accessible and free of charge],” said Justin Evans, global head of analytics and insights at Samsung Ads. “So, while it feels a lot like linear TV, it’s [still technically] CTV.”
But because of the core differences in business models, some TV industry experts say otherwise.
VOD is an “intentional use case, whereas linear is more accessible,” according to Jeff Shultz, Chief Strategy and Business Development Officer of Streaming at Paramount. “You can draw a clear line between AVOD and FAST, and that line is linear,” Shultz stresses. “In fact, FAST channels might actually be yielding more user engagement”, Shultz adds. “Sometimes, people also just need a break from the (21st-century/first-world) struggles of choosing what to watch,” he noted. In his words, Pluto TV “produced more engagement in terms of yielding more MAUs, total viewing hours and thus more revenue.”
The rise in popularity of video has seen FAST come a long way in recent years, which can be attributed in no small part to the increase in availability of smart TVs and connected streaming devices. This is echoed in Conviva’s 2022 State of Streaming report which reveals big screens are dominating viewing time, with 77% of all viewing via a smart TV, connected device or gaming console, versus mobile (11%), desktop (7%), and tablets (5%).
The appeal for consumers is the combination of traditional broadcast within a streaming landscape. Content is presented in a way where the viewer has no control over programming within a single channel, versus traditional subscription streaming, which requires a user to actively find and select a program. This, coupled with the growing interest in existing content libraries and the zero cost to consumers, is driving the FAST evolution.
Launching a FAST channel provides a huge opportunity for content owners and distributors to broaden the reach and increase the exposure of existing SVOD (Subscription Video on Demand) or AVOD libraries, Fastchannels.tv notes.
Growth for free ad-supported (FAST) services in the U.S. shows no signs of slowing as audiences, advertisers and content owners lean into the FAST model. S&P Global estimated that total FAST ad revenues in the U.S. approached $4 billion in 2022, with that total projected to more than double to just under $9 billion by 2026. While more than 20 FAST platforms are available in the U.S., the “Big Three” of the FAST world Peacock, Pluto TV and Tubi are projected to account for a combined two-thirds of total FAST revenues in 2022 and for each year through 2026.
A key driver in growth for the sector is the ongoing migration of audiences and ad revenues from linear TV networks to streaming services owned by Paramount Global (Pluto TV), Comcast Corp. (Peacock) and Fox Corp. (Tubi). As each expands programming at their FAST outlets, a virtuous cycle is established that drives audience growth, increased advertiser interest and higher ad revenues.
Paramount’s purchase of Pluto TV in 2019 and Fox’s 2020 acquisition of Tubi helped bring the FAST model to the masses and kickstarted a land-grab that has network owners, tech companies, multichannel TV distributors, broadcasters and TV manufacturers operating FAST services and fighting for their share of the rapidly growing revenue pie.
In its most-recent research from March 2023 S&P Global expects that total U.S. video ad revenues could top $73 billion by 2027, benefiting from the broader shift of advertising spend migrating to digital formats and from consumers embracing streaming video services. S&P notes that advertisers in the past had gravitated toward the scale offered by YouTube, Meta, Roku Inc. and Amazon, but rapid audience growth at video services operated by Comcast, Disney, Fox Corp., Paramount and Warner Bros. Discovery have resulted in video ad spend swiftly flowing to a much wider range of services than in past years.
Justin Fromm, Head of Research at LG Ads Solutions points to the key role the linear nature of FAST channels has in helping consumers avoid decision paralysis, while shorter ad breaks make for a better consumer experience.
“FASTs are the future of cable. The turn on and tune in opportunity that FASTs offer has tremendous value, especially alongside the wide variety of on demand offerings, across which the volume of content can cause decision paralysis. In research that we have conducted with a national sample of Connected TV households, FAST Channels received higher scores on “Always has something I like to watch” and “Makes it easy to find something to watch” than AVOD, SVOD, and Cable/Satellite among users of each type of service. With shorter ad breaks and without the monthly cost of cable and satellite, we expect to see the adoption of FASTs continue at a rapid pace,” TVRev notes.
“Magna Global forecasts digital video’s share of the combined digital ad spend in the U.K., Germany and France will rise from 8.1% in 2021 to 10.0% in 2026, indicating a move from linear TV, radio and print to digital formats, in line with the growing popularity of OTT video. Corroborating this trend, S&P Global Market Intelligence research shows that the big four advertising groups have twice revised upward their 2022 annual forecasts, citing increased annual organic growth, fueled in part by digital advertising growth,” S&P Global says in its “5 Key OTT Trends report” for 2023.
Recently Blue Ant Media released data about the FAST market in UK and in other territories.
UK FAST channel revenue has already increased 180 times between 2019 and 2022. FAST will account for nearly 20% of the UK’s $3bn premium online ad-supported video market by 2027 (of which $500m will be attributed to FAST). FAST is a weekly habit for 15% of UK online viewers.
The general movement of consumers from free TV towards free online video is a key driver of ad-based online video monetization, as advertisers start to follow eyeballs from traditional TV towards digital and CTV environments.
In terms of content, in the US, local news channels have carved out an important niche on FAST.
News was the top FAST channel genre is the US according to Amagi, with 33% of hours of viewing, 8% for movies and crime, 7% for entertainment and 3% for sports. News is the leading genre in APAC (14%), but in Europe, documentary channels are number one (15%), while in Latin America, movie channels (21%), according to Amagi.
However, the Blue Ant-released reports also says that “outside of North America, Europe and a handful of more advanced economies in APAC, FAST remains a largely nascent and uncertain prospect. Even in markets that seem primed for premium ad-supported video services, such as India, the generally lower advertising yield combined with low CTV and high-speed internet household penetration, has some in the industry questioning whether FAST exists as a profitable pursuit in the country – at least in its current guise. Although Samsung TV Plus is present in India, much of the movement into FAST from Indian content owners has focused on serving diasporic audiences living in more advanced markets, such as the US and the UK, where FAST channels are likely to be more profitable, rather than local viewers. This is a trend that we are likely to see in other emerging markets. And, although other key markets, such as Brazil and Latin America, are showing promise, mature western markets, particularly the US, are where most of the money will come from in the FAST segment, at least in the near-to-medium term.”
How do FAST channels operators make money?
The same report by Omdia for Blue Ant states that business models for FAST channels typically fall into three main types: revenue share, inventory share, or flat fee.
“In a revenue-share model, the platform owner is responsible for selling advertising inventory and agrees to pay a share to the channel provider. This is usually split 60/40 in favor of the channel provider, although 55/45 or 50/50 splits are becoming more common. Inventory share is the dominant model in the US market.
This is where the channel owner allocates some of the advertising spots to sell itself. In both inventory and revenue share models, part of the ad revenue will go to the technology partner.
Under a flat-fee model, the channel or content owner agrees to provide its content to the platform in return for an agreed annual fee. This is a less common model. Content owners looking to take a more hands-off approach to monetizing their (often legacy) intellectual property (IP) through FAST channels can, meanwhile, look to license their content to FAST operators and aggregators for use in their O&O FAST channels. Although CTV manufacturers are becoming increasingly selective in licensing content, there is a new emergent class of FAST channel operators, which will take content from smaller content owners, package it into channels, aggregate those channels with other FAST channels and then distribute said channels to FAST services and platforms. In these instances, the advertising element of FAST is also operated – or at least managed – by the aggregator, which then pays out a share of advertising revenue to the content owner after taking a cut itself, significantly reducing complexity for the content owner.”
In a fresh analysis, Cantech Letter summed up very well why FAST is about to get really furious.
The number of FAST channels is growing quickly, and their share on the US market in mid-2022 reached 24%: “With the saturation of SVOD and consumer pushback on pricing, the growth of AVOD and FAST is a logical step. The next question is, will the advertising dollars follow the eyeballs. History has shown that the answer tends to be yes whenever there is a gap between viewership and ad dollars,” Cantech Letter notes. The numbers speak for this: CTV has risen to taking 36% of the viewing time compared to linear TV and yet only 18% of the ad spend. So, advertisers are now actively moving money to CTV.
But the analysts warn: “There is one other factor that will disrupt the smooth transition toward open programmatic in CTV – the fact that most CTV budgets are being driven by a shift away from linear TV. Linear and CTV buying tends to be managed by the same team. The team that is driving the linear TV process will be much more comfortable with the direct purchasing model rather than programmatic. The learning curve is steep with programmatic, which will also hamper the growth trajectory into CTV.”