Analysis: 90% of Hulu Customers Are on Ad-Supported Plan as Rising Costs Force Consumers to Ad-Supported Streaming

For more than half of Americans living paycheck to paycheck, penny-pinching and cost-cutting is the name of the game, and unfortunately, subscriptions to streaming services are no exception. So far in 2023, the number of customers who subscribed to at least one streaming platform dipped from 82%, down from 89% in 2022, and for both subscribers and streamers, the race is on to stop (or at least slow) the bleeding.

But first? An ad break.

Thanks to more and more streaming services offering ad-supported tiers as subscription options compared to the traditional ad-free plans, customers who are looking for better budget-friendly options aren’t being left in the dark.

A report this week from research firm Ampere Analysis shows that ad-supported streaming subscription tiers in the United States are on the rise with 100 million domestic consumers now subscribed to a lower-cost subscription plan that features commercials. Three services that launched as ad-supported services — Hulu, Peacock, and Paramount+ — lead the way, representing the bulk of subscriptions on ad-supported plans. The vast majority— 90%, or approximately 45 million subscriptions — of Hulu users are subscribed to its ad-supported tier. Peacock and Paramount+ are also predominantly led by ad-supported subscribers, with 30 million users and 25 million users in the U.S., respectively.

The overall numbers may seem to skew heavily in favor of ad-supported tiers, but the same is the case for new subscribers who may be coming in with a tighter-than-in-previous-years budget: 33% of new streaming subscriptions, are on ad-supported tiers, according to a report from earlier this year.

But most of the major, previously premium streamers are getting in on the game, as well. Both Netflix and Disney+ added ad-supported tiers in late 2022, and as of May, Netflix claims it now has five million global users on its ad-supported Standard with Ads plan with more than one million of those accounts in the U.S., or 2% of the subscriber base. Those numbers come in the face of big changes at the streamer: in addition to recent quality improvements to the ad-supported plan and continued efforts to crack down on password sharing, Netflix is removing its most basic ad-free tier for new subscribers in many markets, including the U.S., in an effort to force customers to either pay more for a higher-priced ad-free plan or to sign up for the ad-supported option, which might cost less, but generates more revenue for the streamer.

At the House of Mouse’s flagship streamer, Disney+ announced that 36% of its new customers had signed up for an ad-supported tier in the three months following its launch, outranking both Netflix and — at the time — HBO Max. New numbers have yet to be reported since the launch of Max, but prior to the HBO Max-discovery+ merger, discovery+ had approximately 10 million ad-supported accounts while HBO Max had around two million. Overall, approximately 800,000 Disney+ customers are on its ad-supported tiers, about 2% of its base.

With Prime Video preparing to launch an ad-supported tier and Apple TV+ looking to get in on the action as well, streaming customers will have less to worry about when it comes to keeping their subscriptions within their budgets. Yes, customers have had to weigh the pros and cons of sitting through ads to get to their favorite shows and movies, and money, as it so often is, is the greatest motivator, but it is always nice for consumers to have options.

A new study from Hub shows that 59% of streaming subscribers would rather save the extra $4 or $5 that an upgrade to an ad-free tier would cost them and watch ads. As The Streamable has previously reported, ad-supported streaming plans usually cost between 30%–50% less than their respective ad-free versions, and even if you were to only switch out a couple, the savings stack up, especially as planned and projected subscription price increases roll out.

In tumultuous and financially uncertain times, users also prefer the flexibility of having multiple tiers to choose from. Twenty-seven percent have switched tiers during their subscription period, and of that group, 60% have switched from an ad-free tier to an ad-supported tier. Thirty-six percent of total users surveyed by Hub said that the main reason they switched to an ad-supported tier was to save money, and 27% who hadn’t switched said that they would if it saved them at least 30% of their current costs.

While many streaming subscribers are cutting their services, the influx of ad-supported subscriptions or the switch from ad-free tiers proves customers will do what they can to hold onto their streaming services. Escapism, after all, is important, and escapism for consumers means business that is impossible for streamers, especially the ones still late to the ad-supported game, to ignore: the Ampere report shows that ad-supported subscription tiers in the U.S. will generate more than $10 billion in advertising revenue come 2027.

Regardless, ad-supported plans account for about one-third of premium SVOD signups. That’s 44.5 million users on ad-supported plans. And unlike the economy, those numbers show no signs of slowing.