New survey data from Hub Entertainment Research shows consumers are nearing their limits on spending for TV content. But while cost is still a key factor in value, users indicated higher loyalty for ad-free services, with more reporting confidence in sticking with their pricier commercial-free TV services a year out compared to those using cheaper or free ad-supported services.
Per Hub’s annual “Monetization of Video” report, respondents on average estimate spending around $82 per month on TV content, nearing the limit of the $87 maximum that they say they’d be willing to shell out.
But while most major streamers have launched cheaper ad-supported plans and there’s been a proliferation of free ad-supported streaming TV (FAST) services like Fox’s Tubi, Paramount's Pluto TV and The Roku Channel, Hub’s survey suggests consumers may attach greater value to their more expensive ad-free subscription services.
Hub asked consumers whether they’d still have or use an exisiting service a year from now, where 85% of current users said they definitely or probably will for ad-free services, while just under three quarters said the same for ad-supported services (including both lower-cost subscriptions with ads or completely free). Within those cohorts, a greater percentage of users reported higher confidence they’d still be using their ad-free service in a year, with 52% saying they definitely will, compared to 40% who said so for ad-supported services. And among ad-supported users almost 20% were on the fence, reporting they might or might not still use the service in a year’s time, compared to just 10% who said the same for ad-free TV services.
“Despite the plateau in overall spend, people paying extra for ad-free services consider them more valuable and are more loyal,” wrote Hub in the report. “Cheaper ad-supported and FAST services like Pluto and Tubi have helped to fill the gaps for people tapped out on spending, but loyalties to those services may not be as strong.”
Cost matters but content, features still key for value
While stickiness is important for a streaming industry challenged by churn, being ad-free or offering cheapest plan aren’t the only ways to deliver value for users.
Hub disclosed the top seven factors respondents say add the most value to TV services, which include a mix of price-related and content-related aspects. The firm noted positive findings for streamers that are seeking profitability and may need to raise prices.
The research company asked respondents to prioritize 16 factors based on how much value each adds to a streaming or TV service. The highest scoring factor for adding value, according to Hub, is “lower price than other platforms with similar content” – which touches on both components of cost and content. Two of the top seven factors also relate to cost – although consumers aren’t just worried about getting the lowest price. Instead, respondents care about shows being ad-free as well as having a choice of an ad-free or a less expensive ad-supported tier.
And for value, content remains a priority – including new movies. The second-highest scoring value factor was having access to recent theatrical releases. Other content factors ranking in the top seven include having all seasons of every show, getting all episodes of seasons released at once, and having original content that is exclusive to the platform or service.
“These results are encouraging for streamers under pressure to maximize profits,” said Jon Giegengack, principal at Hub, in a statement. “Consumers are feeling the pinch of inflation. But even so, key content like theatrical movies and exclusive originals are as important as cost – great news for platforms that need to raise prices, not lower them.”
Most streamers have implemented price hikes in recent months and years, such as a $1 bump to ad-free monthly plans for Max from Warner Bros. Discovery in June. TVREV analyst Alan Wolk has previously pointed to the tactic of widening the gap between the cost ad-free and ad-supported plans, in part to drive uptake to the latter which generate advertising revenue on top of the subscription. He’s also warned of continued increases to come, contending most major streamers entered the game with ultra-low prices to attract subscribers that they now are slowing but surely raising.
To better court consumers watching their wallets, among other drivers, some streamers are playing nice with each other and participating or exploring bundling with competing services. WBD and Disney, for example, plan to bundle Max, Hulu and Disney+ at a discounted price for subscribers. Comcast, meanwhile, launched a streaming bundle of Netflix, Peacock and Apple TV+ for $15 per month for Xfinity customers. And with a pending acquisition by Skydance Media in the works, incoming leaders at the new Paramount, namely former NBCUniversal exec Jeff Shell, have pegged being part of an eventual “ultimate bundle” with other partners as key to success in streaming.
Article updated in third graph to reflect that Pluo TV is the Paramount-owned FAST service. An earlier version incorrectly stated Pluto TV as Paramount's parent company.