More Consumers Opt for Basic Streaming Tiers with Ads

Parks Associates' research found that consumers are increasingly adopting ad-based video streaming service packages. The main motivation for this is to save money on subscription fees.

This recent study of 8,000 US internet households reveals that on average, ad-based tier subscribers account for 57% of the user bases among the eight leading streaming services: MAX, Netflix, Disney+, Discovery+, Amazon Prime Video, Paramount+, Hulu, and Peacock. “Many video streaming services, needing to boost profits, continue to raise prices and have rolled out ad-supported plans to give subscribers options,” said Sarah Lee, Research Analyst at Parks Associates. “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.”

The motivating factors for AVOD (ad-based video on demand) subscriptions go beyond just saving money. Roughly one-fourth of current AVOD subscribers have adopted this tier to save money, while a similar share was attracted by a bundle or promotion. Additionally, many subscribers see the low-priced ad tiers as a low-risk way to try a new service or re-subscribe to a service they churned away from.

The research also reveals the end-user experience needs improvement. Users commonly report 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, services must improve the ad-based experience or risk losing subscribers,” Lee said, “and the ad revenue that comes with it.”