Netflix Followed by TVING... Introduction of Ad-Supported Subscription Plans

Positive Impact on OTT Profitability... Affordable Plans Offered to Consumers
Industry Closely Watching Market Situation... Expert Says "Option Add-ons May Become Trend"

Following Netflix, TVING has also announced the introduction of an advertising-based subscription plan (AVOD), prompting other online video service (OTT) providers to closely monitor the market situation. AVOD is expected to become the 'new normal' as it positively impacts profitability while offering consumers the option to use more affordable subscription plans.

According to industry sources on the 21st, OTT companies such as Wavve, Watcha, and Disney Plus are considering the domestic introduction of AVOD. A Watcha representative said, "We are not planning to introduce a subscription plan immediately, but we are observing changes in the industry." A Wavve representative also stated, "No specific timeline has been set yet, but we are continuously reviewing it." TVING announced that it will be the first native OTT to introduce AVOD with a monthly subscription fee of 5,500 KRW starting from the 4th of next month. A Disney Plus representative, whose global company already operates AVOD in the US and European countries, said regarding domestic introduction, "There is no confirmed timeline, but as a global platform, it is possible that it will be implemented gradually."

AVOD has been a focus of the OTT industry since Netflix first introduced it in November 2022. Last month, Amy Reinhard, Netflix's Head of Advertising, stated at the 'Future of Media Monetization' session at CES 2024, the world's largest electronics and IT exhibition, that AVOD's monthly active users (MAU) reached 23 million. This figure represents a 53% increase compared to the 15 million users reported by Netflix in November last year.

Choi Ju-hee, CEO of TVING, also expressed optimism during the CJ ENM conference call, saying, "With the launch of AVOD in March, we will start exclusive broadcasting of professional baseball KBO, which we believe is a positive factor for the advertising business." She added, "Conservatively, we expect 20-30% of total subscribers to subscribe to AVOD, resulting in about a 10% increase in revenue." There is also analysis that the introduction of AVOD, by broadening the spectrum of subscription plans, could positively influence the overseas expansion of native OTT providers. An industry insider said, "It could serve as a stepping stone for expansion into countries like those in Southeast Asia, where demand for K-content is high but income levels are not."

Experts also predict that AVOD will become the new normal in the OTT industry. Professor Eun-hee Lee of Inha University's Department of Consumer Studies said, "From the perspective of consumers who watch multiple OTT services, they are likely to choose AVOD because it is cheaper even if they have to watch ads." Professor Choi Cheol of Sookmyung Women's University's Department of Consumer Economics added, "This is not about lowering the price of existing subscription plans while forcing ads, but about adding options without restricting consumer choice," and predicted, "It will not harm consumer rights or reduce benefits."

However, there are also concerns that a solid demand base requires a robust long-term strategy beyond just subscription plans. Professor Byung-min Lee of Konkuk University's Department of Cultural Contents said, "If it is not accompanied by content and intellectual property (IP) strategies, it is uncertain how long the effect will last."