New Ad-Supported Tiers Risk Cannibalizing Full-Price SVOD Offerings: Kagan
As streaming service companies launch ad-supported tiers to cast for a broader customer base, a Kagan report cites “only a faint correlation” for some services between consumers that choose ad-supported tiers and their household income. With Netflix and Disney coming to market soon with less-expensive ad-supported plans, they “may not see a mass influx of new subscribers and could instead see a sizable number of existing subs switch to ad-supported offerings,” Kagan emailed Monday. A third of ad-supported users at most streaming services lived in households making less than $50,000 annually, but 25%-40% were in households with $100,000 or more in annual income, it said. A March survey showed 30% of Hulu users subscribed to the ad-supported tier, 31% of Paramount+ users, 29% of Peacock Premium subscribers and 36% at Discovery+. HBO Max was the outlier, with 43% of users being ad-supported customers, 57% ad-free. Kagan noted HBO Max's ad-supported option was rolled out in the U.S. in June 2021 “and could see more users migrate to it over time.” Most subscription VOD services with commercials have an ad load of about three minutes to five minutes per hour, “far lighter than linear TV ad loads that can exceed 10 minutes per hour at some networks,” Kagan said. “Consumers accustomed to heavier linear ad loads may not be that bothered by comparatively light streaming ad loads and are simply shrugging and choosing ad-supported plans to save a few bucks each month,” it said.