Analysis: What Will the Next 5 Years Bring For Ad-Supported Streamers?
It’s a good time to be in the ad-supported streaming business. Although video-on-demand services like Netflix wouldn’t have dreamt of trying to saddle their customers with ads five years ago, market trends and pressures to monetize streaming platforms have led to a seismic shift in how the industry views ads. One report suggests that by the end of 2023, every major streaming company will offer an ad-supported video-on-demand (AVOD) tier.
A new report from Parks Associates highlights just how responsive customers have been, and will continue to be to such ad-supported streaming plans. The report projects that by 2027, the number of American households using at least one ad-supported streaming service will rise to 57 million. Right now, about 41 million of the ~123 million households in the U.S. use such services.
There can be no doubt that ad-supported streaming is trending up right now. Nearly 60% of U.S. streaming users say they would be willing to watch ads for a reduced or free subscription cost, and major streamers are pouncing. Netflix launched its ad-supported tier on Nov. 3, and Disney+ is set to do so on Dec. 8. In fact, Netflix's co-CEO suggested it may eventually have multiple ad-supported tiers.
Almost a quarter of current Disney+ users say they’ll make the switch over to the new plan when it becomes available, and both companies stand to see big financial returns from their embracing of ads, to the tune of an extra $1 billion+ each by 2025.
The news gets even better for providers of such services. The ad industry is struggling to maintain revenues at the moment, thanks to decreasing viewership on pay TV services. and Paramount Global CEO Bob Bakish called the current advertising market “challenging” in his conference call with investors and reporters at the 2022 UBS Global Technology, Media and Telecom Conference.
If ad providers are having a difficult time, that gives streaming services a great deal of leverage. Streamers can negotiate more target ad experiences, lower ad-loads per hour, and higher prices per ad for themselves if they so choose. As long as they position themselves as the future of the ad industry, media companies with streaming services have a very strong hand in dealing with the advertising market.
The future of streaming is almost certain to be ad-supported at this point. Ad-free premium tiers are unlikely to disappear, as they help streamers get the maximum value they can from their subscribers. But AVOD services and price plans will continue to multiply, and the new report from Parks Associates shows that U.S. customers will be eager to engage with them.