Dive Brief:

• Hulu and AT&T are both reportedly working on new ad formats that would run when viewers pause streaming content, executives told Variety.
• Hulu plans to launch "pause ads" in 2019, which the company says will provide a "natural break in the storytelling experience." The company expects to see more than half of ad revenue come from "non-disruptive experiences" over the next three years, Jeremy Helfand, VP and head of advertising platforms for Hulu told Variety.
• AT&T, which owns DirecTV and U-verse, also has plans to launch new technology next year that will play a full-motion video when a viewer pauses what they're watching. "We know you're going to capture 100% viewability when they pause and unpause," Matt Van Houten, VP of product at AT&T's ad division​ Xandr Media, told Variety.

Dive Insight:

As viewers are cutting the cable cord at higher rates and flocking to over-the-top (OTT) platforms, marketers are looking for opportunities to reach these ad-fatigued consumers. Hulu and AT&T's planned ads that will run during paused content could be a potential solution that plays into the popularity of binge watching on the platforms. The ads could grab viewers' full attention when they pause or un-pause videos, which will likely be attractive to brands.

However, the new experience could significantly frustrate viewers, as audiences don't always like ads, and commercial-free viewing has been a major draw toward OTT services. But, streaming platforms need to monetize their content beyond monthly subscriber fees to continue producing high-value original programming that attracts subscribers.

Video streaming services are potentially costing advertisers billions in revenue, an nScreenMedia analysis found. The average Netflix viewer in the U.S. misses more than 5,700 TV ads during primetime and more than 7,000 in non-primetime viewing, an estimated $7.6 billion for all subscribers. When factoring in ad skipping through DVRs and the use of premium networks like HBO, the estimated value of lost ads drops to about $6 billion.

Ad spend on OTT TV is projected to grow 40% to $2 billion in 2018, according to Magna forecasts. National linear TV ad spend is forecast to grow 1% this year, after removing cyclical events like the Winter Olympics and midterm elections. Despite ratings dropping 10% to 12%, TV ad prices remain high.

TV networks are also unveiling new models for serving ads to attract ad dollars while not bombarding viewers. NBC announced earlier this year that it will reduce the number of primetime ads on its networks by 20% and decrease ad time by 10%. NBC also said it would launch an artificial intelligence-powered tool to scan TV show scripts and match advertisers to the content, resulting in a 60-second "prime pod" to run during the first or last ad break of the show that will only be available to one or two advertisers. The network has plans for other new ad formats, including social commercials, allowing brands to sponsor or be integrated into a pod that includes real-time social media commentary.