Does Netflix Have 20 Million Ad-Supported Subs in the US? Can Streamers Do Anything to Increase Market Penetration?
A recent survey from HarrisX has important data for streaming providers who are trying to envision a life after cable.
Ads were always going to be part of the on-demand streaming equation eventually. Without ad revenues, there simply isn’t enough money flowing into the coffers of streaming services to allow them to offer their platforms at prices less than $30 to $40 per month, especially in a marketplace that requires streamers to show profitability before being rewarded with a higher stock price. Every top streaming platform in the United States besides Apple TV+ now offers a paid subscription option that includes advertisements, but what comes next? A new survey from HarrisX is forcing streamers to answer that question, as market penetration has seemingly plateaued and ad plans aren’t bringing a massive influx of new customers to streaming platforms.
Key Details:
- HarrisX found that 27% of U.S. customers are now using Netflix’s Standard with Ads plan, which could translate to as many as 20 million individuals.
- Streaming penetration inched downward in the first quarter of 2024, suggesting that there may not be room to grow for streamers in the U.S.
- Platforms may have to lean into features that made cable popular to reach viewers who have been reluctant to adopt streaming so far.
The survey from HarrisX has some good news for Netflix. That streamer is already the world’s largest, with 269.6 million global customers as of its last report. One recent study compiled by Wedbush Securities found that Netflix could have as many 7 million ad-supported customers in the United States alone, but HarrisX reports that 27% of domestic customers said they were using the Standard with Ads plan. Variety's extrapolation of that data found that Netflix could have as many as 20 million subscribers on its ad plan in the U.S.
Netflix was able to add 2.53 million customers in the U.S. and Canada in the first quarter of 2024, but its market penetration is still below 70% for all age groups in the U.S. except the 25-29 cohort. That suggests that its password-sharing restrictions and the introduction of an ads plan are not enough to drive huge groups of customers who have thus far been resistant to the streamer’s charms to subscribe to the service.
How Will Streamers Increase Market Penetration?
The problem of expanding market penetration in the United States is not one reserved solely for Netflix. The entire streaming industry must figure out how to solve the problem, as HarrisX reports that total streaming penetration dipped from 85% in the fourth quarter of 2023 to 84% in the first quarter of 2024. A MoffettNathanson note cited by Light Reading shows that video streaming penetration has been fluctuating between 80% and 85% since Q1 2022, suggesting that there simply are not currently that many new customers to be had in the U.S.
For streaming providers, that undoubtedly means a shift to more international markets to try and find new users. Many platforms are already trying to make a concerted push into new territories; Prime Video recently touted its upcoming content slate for Indian audiences, which is full of locally-produced shows and movies. Warner Bros. Discovery’s streamer Max is further rolling out in Latin America and Europe this year, and Paramount+ is bringing its ads plan to Canada and other countries over the next few months.
Still, the affluence of American consumers as opposed to those in other regions around the world has streamers keeping an eye on the domestic market as well. With the data from HarrisX in hand, platforms will have to keep thinking about the best ways to try and increase their presence in American homes, despite the challenges involved in selling a product in a place where roughly 85% of people already have it.
Some platforms are spending big to acquire content that fans used to be able to find exclusively on television, namely sports. Prime Video, for example, has reportedly agreed to the framework of a deal with the NBA that could see marquee regular season and playoff matchups from the basketball league stream on the platform until 2035.
But sports have been available on various streaming services for years, and the market penetration of has grown at a snail’s pace, if at all. It is possible that streamers will have to adopt more popular features of linear cable plans to lure viewers who have been reluctant to pick up a streaming service thus far. Bundles would be a good start.
There’s already plenty of data to suggest that customers would like more bundling options, but what if streamers could be purchased like add-on channels for a cable plan? There’s a good chance that consumers would respond positively to bundles of streamers that they could add onto their main plan, such as a mix of Disney+, Hulu, and Max in a hypothetical “Entertainment” super-bundle. That would give customers increased flexibility to add more sports content, entertainment streamers, or whatever else they like to their video subscription.
Bundles of this type would require cross-company cooperation, which is why viewers may not see such combinations become common in the near future. The closest thing so far to bundles of this type is the joint venture live TV streaming service under construction by Disney, Fox, and Warner Bros. Discovery that will offer livestreams of 14 sports-related channels. But this platform is not an on-demand streamer, and therefore won’t have any effect on the penetration of streaming services in the U.S. as measured by HarrisX.
In short, legacy media executives are going to have to start earning the hefty bonuses they collect each year. The challenge of pulling in streaming-reluctant audiences in the United States is a tough one, but it’s clear that ad-supported streaming plans and password-sharing restrictions aren’t doing enough to convince new customers to come into the market, even if they do boost average revenue per user. Netflix has achieved the success it hoped to see when it launched its Standard with Ads plan, but its next task of boosting its market penetration may not have such an easy solution.
Amazon Prime Video
Amazon Prime Video is a subscription video streaming service that includes on-demand access to 10,000+ movies, TV shows, and Prime Originals like “The Lord of the Rings: The Rings of Power,” “Jack Ryan,” “The Marvelous Mrs. Maisel,” “The Boys,” and more. Subscribers can also add third-party services like Max, Showtime, STARZ, and dozens more with Amazon Prime Video Channels. Prime Video also offers exclusive live access to NFL Thursday Night Football.