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Report: Time is Right for Ad-Supported Streaming, but Risks Loom for Advertisers

David Satin

Media research firm Kantar has released its annual Media Trends and Predictions report for 2023, and the report has more good news for streamers like Netflix and Disney+. Kantar’s report includes some key numbers that show beyond a doubt that the market is ready for the ad-supported video-on-demand (AVOD) subscription options that the companies are introducing this year.

Kantar’s data indicate that customers around the world are increasingly canceling services because of price. As inflation continues to tighten its grip over household pursestrings, the rate of cancelation due to cost has increased. It is now at 31% for U.S. customers, up from 25% a year ago and the rate is even higher in the U.K., which is feeling the bite of inflation even more keenly.

Those numbers clearly indicate that there is a growing market for cheaper streaming plans. One of the most popular ways to offer customers a lower-priced tier is by making the content ad-supported, which used to be anathema to major streamers who wanted to break away from the linear TV experience. But Kantar’s numbers show that over half of U.S. customers would now welcome ads if it made their streaming subscription cheaper.

This means that Netflix and Disney+ can expect robust interest in their new or upcoming ad-supported tiers. Netflix launched its AVOD plan on Nov. 3, while Disney+ is introducing its own on Dec. 8. As long as the companies don’t see a huge portion of their AVOD signups come from their existing customer bases, each could see upwards of $1 billion in additional revenue by 2025.

The biggest risk from the introduction of ad-supported price plans may come to advertisers themselves. Demand for ads remains high in the media industry, but global supply chain issues have caused inventories to drop and prices to rise.

That means that ad-supported streaming runs the risk of creating two kinds of users: lower-income users who sign up for ad-supported tiers because they are cheaper, but are less able to afford the products they see advertised; and those who can afford to buy products they see advertised but can also afford to pay for ad-free streaming plans.

Despite those risks, Kantar’s report found that 89% of advertisers would consider investing in advertising on a streaming platform. Streaming platforms and ad companies will want to be creative in the way they employ such ads, whether it be via AVOD tiers or free ad-supported TV (FAST) channels that help emulate the linear TV experience.

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