As streaming services struggle to boost profits by raising prices, a new Parks Associates study has found more streaming consumers are opting for basic tiers with ads over more costly, ad-free premium tiers.
Overall, the Parks survey found that ad-based tier subscribers account for 57% of the user bases of the eight leading streaming services, even though those subscribers complain about poor user experiences with long ad breaks and about seeing the same commercials far too often.
“Ad-Based Streaming: Consumer Demand & Engagement,” a Quantified Consumer study of 8,000 U.S. internet households, examines why ad-based services are experiencing a surge in adoption, gauges which services are the most popular and examines household sentiment towards the ad-based experience.
The research reveals that on average, ad-based tier subscribers account for 57% of the user bases of the eight leading streaming services: Max, Netflix, Disney+, Discovery+, Prime Video, Paramount+, Hulu and Peacock, according to Parks Associates’ consumer survey work.
“Many video streaming services, needing to boost profits, continue to raise prices and have rolled out ad-supported plans to give subscribers options,” Parks Associates Research Analyst Sarah Lee said. “In many cases, these ad-based tiers are more profitable for businesses, adding urgency to the need to improve the ad experience for their subscribers.”
While cost is an important factor, the researchers stress that the embrace of ad-supported video-on-demand (AVOD) services goes beyond just saving money. Roughly one-fourth of current AVOD subscribers have adopted this tier to save money, while a similar share of subscribers were attracted by a bundle or a promotion. Additionally, many consumers see the low-priced ad tiers as a low-risk way to try a new service or re-subscribe to one they churned away from.
The Parks research also shows that the end-user experience needs improvement. Users commonly report that the same ads repeat too many times, ad breaks are too frequent and long and the content stops but no ads are shown.
“As services continue to raise prices and viewers shift to ad-supported tiers out of necessity, it is critical that services improve the ad-based experience or risk losing subscribers and the ad revenue that comes with it,” Lee said.
Parks Associates will share this and additional streaming video consumer research at its upcoming Future of Video: Business of Streaming conference, Nov. 19-21 at the Marina del Rey Marriott in Marina del Rey, California.
