More streaming TV users in the United States are taking advantage of lower-priced, ad-supported services than they did several years ago, according to a new report published by research company Antenna this week.
The report, called State of Subscriptions, showed one-third of customers signing up for a new streaming video service are doing so on ad-supported tiers, which tend to be priced lower than commercial-free plans, an uptick from 18% reported in 2018.
Across services, Comcast's Peacock has the highest percentage of users taking their ad-supported tier, with 69% of streamers choosing the lower-priced plan with commercials. Hulu had the second-highest number of subscribers on its ad-lite plan with 58%, followed by Discovery Plus with 43%, according to Antenna's data.
The increase comes as companies like Netflix, Disney, Warner Bros Discovery and AMC Networks have introduced, or are planning to introduce, ad-supported tiers of their streaming services in an attempt to hook more people into their products over the long-term and capture their share of a multi-billion connected TV advertising industry.
This week, a separate study from Ampere indicated the addressable TV ad market increased 17% to $56 billion last year, and is projected to grow to $85 billion by 2027 as more money shifts from traditional broadcast and cable advertising toward connected TV platforms.
Research published by Antenna suggests those marketing dollars are headed in the right direction, as more Americans pick ad-supported tiers over commercial-free ones. An analysis of nearly 140 million subscription sign-ups last year showed 32% were to ad-supported plans. The number of sign-ups was nearly double the 60 million reported in 2018, when less than one-fifth of sign-ups were to ad-supported services.
Antenna combs through financial data harvested from opted-in users to evaluate which plans consumers are taking. Those records include online purchase receipts, credit and debit card transactions, bank statements and bill-scrape data.
From that data, Antenna says it is able to get a good indication of the breakdown between commercial-free and ad-supported subscriptions in the country. At the end of last year, 22% of the 200 million subscriptions analyzed by Antenna were to ad-supported services, a number that increased to 25% during the first quarter of 2023.
"Lower-cost ad-supported plans have provided consumers with the ability to afford more services with their entertainment wallet, and a majority of them view that option as a viable trade-off," Antenna concluded.
But the subsidy is quickly starting to erode as media companies seek a return on their content and marketing spend. This week, Paramount Global raised the price of its ad-supported Paramount+ tier to $6 a month, an increase of $1. It followed similar price increases by Disney's Hulu and Netflix over the past two years.
Some companies are also charging more for their commercial-free services to encourage customers to switch to their ad-supported plans. On a conference call with investors last month, Disney CEO Bob Iger said a recent price increase on the commercial-free plan of Disney Plus saw few customers dropping the service, while the number of streamers opting for the ad-supported plan increased.
"We clearly would like to drive more [subscribers] to the ad-supported service, which we did in the quarter, by the way," Iger affirmed. "The obvious reason is because of the ARPU (average revenue per user) potential of the ad-service Disney Plus...that is one of the strategies that we believe will help lead us, ultimately, to profitability and growth."