Report: With Churn Rates Nearing 50%, Content Is Key for Ad-Supported Streaming Success

As ad-supported streaming takes its hold on the American market, free and low-cost services are scrambling to find ways to stand out from each other. The proliferation of ad-supported video-on-demand (AVOD) services means that the streaming market is more saturated than ever, and as inflation has kept consumers wary of high subscription costs, content is an even more important factor in keeping users engaged than ever before.

Those challenges have led to an increasingly high rate of customers canceling streaming services. According to a new report from media research and insights firm Parks Associates, 48% of users of over-the-top (OTT) subscription video-on-demand (SVOD) and AVOD services bounce between streaming platforms over the course of a year, canceling one in favor of another.

That high churn rate is mostly due to users trying to find the content that they want the most, with one-third of U.S. households stating that “a wide variety of programs” or “good programming” drove their decision to subscribe to an AVOD service.

The report shows just how quickly ad-supported streaming has become a major factor in the streaming marketplace. In 2019, just over 20% of U.S. customers subscribed to an AVOD service. That number has risen to over one-third of U.S. households, and though the rate of growth has slowed, it is still rising.

Pluto TV, Tubi, Peacock, and [The Roku Channel] comprised the top tier of ad-supported streaming services in 2022. Each is watched in 9-11% of U.S. internet households. Amazon’s Freevee (previously known as IMDb TV) led the group of next-most popular services, with 6% penetration, according to Parks.

Similar to SVOD services, ad-based streamers must rely on original/unique content to keep customers engaged. Park’s survey found that 65% of users of AVOD services said that they chose that service because it offered programming that no other service could provide, and the service offered ways to watch on multiple devices in any location.

As the streaming market reaches saturation, content providers must do whatever they can to try to stay on top of the heap. The new report from Parks makes it clear that content is an incredibly important factor, especially among AVOD services that can’t compete with each other by smply lowering the price of a subscription.