With people spending more time at home due to the virus, there has been a ton of speculation around what impact this will have on streaming consumption. For example, based on prior disruptive incidents, Nielsen estimates viewing could increase 61%. WURL released data that it saw 7%-44% regional increases on its platform last weekend. A message I received yesterday from SpotX said its experienced a 16% increase in video ad inventory across their entire global marketplace. So the data suggests increases, the range of them is pretty wide.

A sub-question within the “streaming is surging” speculation is how it affects AVOD vs. SVOD services. Even before the virus the dynamics in both categories were fluid. AVOD services are benefiting from multiple tailwinds: cord-cutting, CTV-based viewing, targeting, content proliferation, etc. SVOD services were proliferating, with new competitors like Disney+, Apple TV+, Peacock and soon HBO Max (Quibi could be included too, although its mobile-only). From my perspective, the new competition made incumbents like Netflix look vulnerable. I calculated there was a decent chance Netflix would actually lose subscribers in its US/Canada region in Q1, which would be unprecedented.

It seems to me that AVOD is a clearer beneficiary of stay at home viewing, for one basic reason: ad revenue growth is reasonably correlated with viewership growth. The more people watch, the more revenue AVOD services bring in.

Of course, there’s a critical assumption embedded here - that there’s sufficient advertiser demand to fill the spike in inventory. Certain categories of ad spending, like travel, are all but locked up right now, as underlying demand has (temporarily) collapsed, directly impacting big ad platforms like Google.

On the other hand, AVOD was already benefiting from the rotation of ad dollars into CTV. So even if that tailwind settles down to just a breeze, it provides a backstop of demand for surging AVOD viewership. It is worth noting however, that Scott Rosenberg, who runs Roku’s Platform business, has observed in the past that “we generally would not characterize the business as supply-constrained as much as demand-constrained….We’re in the process of bringing over significant new demand from TV advertising.” So the backstop may not be that big, and also will apply differently to different services.

Yet another virus-induced dynamic is that with live sports now on hold, there is a lot of ad spending up for grabs. Whether an advertiser can find similar attributes of a typical NBA, NHL or professional golf viewer in AVOD inventory is a wildcard. But it’s probably fair to assume at least some of this spending will peel away to AVOD, if for no other reason than to give AVOD a chance to prove itself.

Net, net, there are a lot of cross-currents for how the virus will impact AVOD. But generally speaking, I’m quite optimistic about it and believe when Q1 results are reported, all companies in the AVOD value chain will show some benefit (clearly Fox believes this as well, having boldly plunking down $440 million to buy Tubi right in the middle of the virus scare).

It’s a little harder to see how SVOD benefits much from the virus. Importantly, you don’t pay anything more for Netflix, for example, based on how much your family watches while you’re cooped up at home. There are some exceptions, like maybe some people will bump up their plans to access more concurrent streams, or out of a desire to get 4K access. There may also be some people who were considering canceling Netflix but delayed the decision given the amount of time now at home, thus reducing churn. But then there are others who will move up cancellations as part of belt-tightening moves.

There’s another issue for SVOD, which is that these services have spoiled us to expect new programs and new seasons of existing programs will launch continuously - that’s part of what we believe we’re paying for and that’s what “Peak TV” is all about. But productions have stopped due to the virus, which means all kinds of unknown delays are going to begin kicking in for program releases. SVOD services have carefully calibrated release plans meant to drive new subscriber acquisition and retention that are now up in the air. When Disney+ decides to accelerate “Frozen 2” three months ahead of schedule, that’s good news short-term but raises questions about longer-term subscriber additions/churn.

Net, net, there are a lot of cross-currents for how the virus will also impact SVOD services. Overall I think SVOD will receive a slight benefit from stay at home viewing, but not the same level that AVOD services will receive. As the Q1 numbers are reported in April we’ll all get a clearer picture of what the virus means to the industry.

(Note: We’re still planning for the June 11th Connected TV Advertising Summit. I know it’s a dicey period right now, but I’m cautiously optimistic we’ll return to semi-normalcy by then.)