As major streamers introduce ad-supported subscription plans in Europe, research from BB Media shows they’re capturing a growing proportion of the market, while consumers also indicate preference for streaming with ads in exchange for lower costs.

In key European markets of the UK, France, Germany, Italy and Spain streamers are swaying users to cheaper ad-supported subscription tiers.

From Q2 2022 to Q4 2023, ad-based revenue models experienced significant growth in several major markets within the EMEA region, according to figures from research and analysis firm BB Media.

“There has been consistent growth in AVOD as European consumers opt to pay less for services that contain ads,” Delfina Gianibelli, media analyst at BB Media, told Stream TV Insider.

Netflix led the way among major SVODs when it launched its AVOD subscription tier at the end of 2022. Between Q2 2022 to Q4 2023 the percentage of its users who pay for an ad-free plan dipped 9 percentage points to 81% in the markets surveyed, while those opting for lower-cost Netflix with ads increased by the same amount (rising from 10% to 19%) in the period.

Netflix this month disclosed the latest figures for users on its plan with ads, now counting 40 million monthly active users across the 12 countries where its available.

Of the countries surveyed by BB Media, more Italian Netflix users have adopted the cheaper ad plan but all markets exhibit the same trend.

Of the major streamers in EMEA, Amazon Prime Video has demonstrated the highest rate of adoption. Amazon took a different approach than other streamers, where it made Prime Video with ads the default subscription choice for all users, automatically creating a large ad-supported base where consumers need to proactively opt to pay more to upgrade to an ad-free plan. In contrast, SVODs like Netflix and Disney+ introduced lower-cost subscription plans with ads as an option for users alongside existing ad-free tiers. Prime Video rolled out its ad-supported SVOD in UK and Germany in February, following a late January launch in the US.  In Germany 23% of users are now on the cheaper ad plan and 27% of users are in the UK; In contrast Netflix has 18% of users in Germany and 19% in UK on the standard plan with ads (which costs £4.99 per month/USD6.38), per BB Media.

Warner Bros. Discovery only recently rolled out Max in some countries in Europe. Its basic plan with ads has been most successful in Finland where 19% of users have opted for it. Max has yet to launch in Italy, UK and Germany due to contract conflict with Sky.

Overall, BB Media analyst Gianibelli identified “remarkable” increases in AVOD viewing in Europe, highlighting Germany (which grew 10.44%) and Spain (5.21%). AVOD tiers have been adopted by 63% of the viewers in Italy and 71% in the UK.

AVOD SVOD Penetration EMEA _ BB Media

Also in the UK, ITVX and My5 (the free streaming VOD services of broadcasters ITV and Channel 5) increased their shares from 19% and 14% in Q2 2023 to 21% and 17% in Q4 2023, respectively. Completely free services supported by ads – including linear-style free streaming services known as FASTs (free ad-supported streaming TV) have also benefited. Excluding YouTube, in the EMEA region in Q4 2023, Paramount’s Pluto TV FAST was the advertising-based model market leader with a 10% regional share. And Amazon’s Freevee marked share gains in Germany – rising from 31% in Q2 2023 to 39% in Q4 – as well as the UK, where it reached 15% share in the final quarter of 2023, up from 10% in Q2 that year.  

In the period from Q2 2022 to Q4 2023 SVOD penetration has also grown but less dramatically. In Germany, Spain, and the UK, SVOD models grew by 9%, 4%, and 1.7% respectively. The situation appears to be particularly challenging in Italy, where SVOD penetration declined by 2.1% during the period.

“Analyzing the composition of each country’s market share, excluding YouTube, many streaming platforms have benefited from the rising demand for advertising based models,” said Gianibelli. “When asked about the option of adding commercial ads to their subscription plan to reduce costs, half of the French and Spanish respondents said they preferred more affordable plans, even if it meant having ads interrupting the content.”

Respondents in Germany and Italy were even more inclined to choose lower-cost plans with ads, where 6 out of every 10 users showed a preference for ad-supported plans. That preference was particularly strong in the UK, where 69% of users favored cheaper plans with ads.

And while ad-supported streaming uptake and interest in on the rise in Europe, separate recent findings from Teads show that UK marketers aren’t yet fully capitalizing on the CTV advertising opportunity, as challenges with measurement and perceived costs are impeding investment