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Is AMC’s New Ad-Free Service A Model For The Future Of Pay TV?

Recent reports have the AMC Network launching a unique form of OTT app, one that could prove to be a harbinger of things to come.

Or a failed experiment.

It’s hard to predict, but either way, it will be interesting to watch.

What AMC is doing is launching what appears to be a standard-issue ad-free OTT subscription app. The twist, however, is that rather than targeting cord-cutters, it is only available to viewers who have an existing pay-TV subscription.

Now AMC is doing this so as not to screw up its lucrative carriage deals with the aforementioned pay-TV subscribers. But they may have unwittingly uncovered a way for MVPDs to provide an interesting alternative to Netflix and other ad-free services.

What if, for argument sake, an MVPD decided to package up two dozen of their more popular channels and offer them to viewers ad-free, but for a premium price. The service would offer the chance to watch programming live or on demand, and would include various exclusive extras—behind the scenes, OTT-only mini-episodes, and the like.

Would anyone actually pay for that, given that it would be as (if not more) expensive than an ad-supported package with many more channels?

It’s possible.

If the new service was noticeably better than the ad-supported offering in terms of interface (not that hard) and service (ditto) then it could develop a cachet as a luxury brand. (A well-funded start-up called Layer3 is betting big time that there’s a market for a better designed, more upscale pay-TV service, and we think they’re on to something. Translate that out to an ad-free service and it could take.)

On the other hand, it could be a colossal flop, as viewers don’t see any value in paying extra to avoid ads on programming they don’t see perceive to be “premium.” So while they’ll gladly pay extra to watch shows like Game of Thrones or Narcos, they may not want to pay extra to see network and basic cable shows ad free.

Or there may be one or two channels they’d pay to see ad free. Which could open up another option—offer viewers the ability to watch certain channels, or even certain shows, on an ad free basis for an additional fee.

This would be a tricky one to navigate, as it would likely decrease the value of ads on popular shows if advertisers knew a good portion of the audience had opted for the ad-free version. Thus the networks would have to bet that only a small slice of the audience, say no more than 10-15% would choose the ad-free option. It’s a risky bet—they’d have to make deliver “make goods” to the advertisers if it didn’t pan out, but someone might decide it’s worth trying, especially for a show like USA Networks’ Mr. Robot, that has a large time-shifted audience to begin with.

The notion that we are moving to a two-tier society, where those who can pay to avoid ads are able to do so, is disturbing, tempered only by the fact that paying to avoid ads is an “affordable luxury” like buying coffee at Starbucks—the cost of paying to avoid commercials is not going to bankrupt anyone.

Still, the notion is out there and viewers are getting very used to ad-free TV they pay a premium to watch. Which is why it behooves advertisers (and networks) to keep looking at alternatives to traditional interruptive advertising.

You know, things people may actually not pay to avoid.