In the rapidly evolving digital streaming landscape, ad-supported platforms are emerging as formidable contenders against traditional subscription models. This year, ad-supported video-on-demand (AVOD) services are set to outpace their subscription-based counterparts by a significant margin, adding over three times as many viewers.
This projection not only underscores the shifting preferences among consumers but also highlights the strategic pivot streaming services are making towards more accessible, ad-supported content.
According to one projection, ad-supported video-on-demand (AVOD) platforms are set to significantly outperform subscription-based over-the-top (OTT) video services this year, with an anticipated viewer increase that’s more than triple.
Specifically, AVOD platforms are expected to welcome an additional 13.3 million viewers, 4.3 million of whom will come from free premium services, culminating in a total viewer count of 157.1 million. In contrast, subscription OTT services are predicted to see a rise of 4.3 million viewers, bringing their total to 222.2 million.
Netflix’s initiative to curb password sharing has proven to catalyze this shift. By encouraging users to migrate to its ad-supported tier, Netflix has successfully converted a segment of non-paying users into contributing subscribers. Apart from enhancing Netflix’s subscriber base, this move has set a precedent for the industry. Disney+, Hulu, and ESPN+ follow in Netflix’s footsteps and aim to replicate this strategy within their ecosystems.
Despite facing challenges due to their smaller audience bases and less ubiquitous presence compared to Netflix, these platforms recognize the untapped potential in ad-supported tiers.
The rise of AVOD platforms is not just a response to the industry’s crackdown on password sharing. It reflects a deeper change in consumer behavior, especially among Gen Z adults. Over half of this demographic uses password sharing, accessing streaming services through someone else’s subscription. While initially seen as a hurdle, this data is now viewed as an opportunity.
Streaming services are leveraging ad-supported models as an enticing alternative for these users, who are accustomed to free access but are open to ad-supported content.
A December 2023 study by DISQO showed that 55% of Gen Z adults utilize streaming TV services via subscriptions owned by others. Additionally, this practice of password sharing extends beyond Gen Z, with approximately 30% of adults across various generations in the US also doing the same thing.
The symbiotic relationship between ad-supported streaming’s growth and the efforts to counter password sharing is reshaping the streaming market. On one side, the increasing viewer base for AVOD services demonstrates a robust appetite for ad-supported content, driven by the allure of lower costs and the convenience of access without the commitment of a full subscription fee.
On the other hand, platforms are devising strategies to convert password sharers into paying subscribers, expanding their revenue streams while catering to a broader audience’s preferences.
As streaming platforms navigate these trends, their focus on profitability, viewer engagement, and innovative advertising formats is pivotal. This approach addresses the challenge of password sharing and capitalizes on the growing preference for ad-supported content.
The dynamic interplay between consumer behavior, technological advancements, and strategic business models is crafting a new narrative in the digital streaming domain, one where ad-supported platforms are not just an alternative but a primary choice for a growing number of viewers.