Streaming services that had operated without advertising introduced cheaper tiers carrying it. The resulting inventory changed the economics of video advertising in several directions at once.
Premium supply expanded sharply
High-quality, professionally produced video had been scarce and expensive, with demand exceeding what broadcasters and early streaming advertising could supply.
The new tiers added substantial inventory of exactly that type, and the increase in supply moderated the price growth that scarcity had been driving.
Buyers who had been priced out of premium video found it accessible, which broadened the set of advertisers competing in the format.
Subscriber economics drove the decision
Subscription growth slowed as most households that would subscribe had done so, and price increases produced cancellations.
A cheaper tier funded partly by advertising allowed services to serve price-sensitive households without reducing the revenue per subscriber.
In several cases the advertising-supported tier produces more revenue per household than the ad-free one, which is why it has been promoted rather than positioned as a downgrade.
Targeting expectations arrived from digital
Buyers accustomed to audience targeting expected the same in television, and services could offer it because they hold registration data on every household.
Advertising loads were kept deliberately light at launch to avoid provoking cancellations, which constrained supply relative to what the subscriber numbers implied.
Loads have increased since, and each increase is a test of how much interruption a paying subscriber tolerates before leaving.
Measurement conventions collided
Television buying was built on panel-based audience estimates, while streaming reports census-level delivery from its own servers.
The two describe the same campaign in incompatible terms, and reconciling them across a mixed schedule remains unresolved.
This is why cross-platform measurement has attracted so much industry investment, since without it the two halves of a video budget cannot be compared.
Frequency became the visible problem
With inventory spread across many services, none of which share identifiers, capping exposure across a household is difficult in practice.
Viewers report seeing the same advertisement repeatedly within a single evening, which damages the premium the format is sold on.
Solving it requires either a shared identity framework across competing services or consolidation of buying through fewer routes, and both are moving slowly for the same commercial reasons.
In the meantime buyers manage the problem by limiting how many services a single campaign runs across, accepting narrower reach in exchange for exposure they can at least approximately control.