Streaming Customers Get Choosy About When to Pay for Ads
Summary
- Growing pool of subscribers tolerate commercials on some services but not others
Kari Dalia is a self-proclaimed reality-TV buff who used to spend roughly $100 a month for ad-free streaming services. When she recently reviewed her personal budget, she decided to scale back.
The 34-year-old e-learning designer from Chicago says she now shells out only for the ad-free version of Comcast’s Peacock, the service she watches the most, for shows such as Bravo’s “Below Deck" and “Summer House." She opts for the lower-cost ad-supported versions of Hulu, Netflix and Paramount Global’s Paramount+.
For some customers, the choice of whether to pay for streaming services with ads is simple. One group of viewers is always willing to watch ads to save money, while another detests them and cuts the cord to get away from commercials.
But for viewers such as Dalia, it is a more complicated decision. Among the factors these consumers consider: how badly they want to watch a given show, how many people use their account, the shape of their household finances, and how much time they plan to spend across all of the films and shows available on a service.
Dalia is among a growing group of streaming customers who are getting choosier about when they pay for an ad-free experience and when they opt to save money. “Time is money. I will give my money to save time on ads for the one I’m using the most," she said.
These so-called ad managers—those who sometimes pay for ad-free service and other times don’t—represented 46% of premium streaming-service customers with two or more subscriptions at the end of March, according to subscriptions analytics firm Antenna. That percentage is up from 39% two years earlier, when fewer streaming services offered ad-supported plans.
Meanwhile, the pool of people with two or more streaming subscriptions who always opted for ad-supported tiers across the services that offered them fell to 25% in March from 35% two years earlier. The portion of those subscribers who avoided ads completely given the choice grew to 29% from 26%.
Streaming services from Netflix to Disney+ have launched ad-supported plans over the past year, hoping to attract new customers willing to pay less in exchange for viewing advertisements. Amazon is also planning to launch a new ad-supported tier of its Prime Video streaming service, The Wall Street Journal reported earlier this month.
These subscriptions bring in more revenue per user than ad-free plans because streaming services benefit from the monthly subscription fee as well as revenue from ads sold. Netflix said in April that its new ad plan was generating more revenue per user in the U.S. than its standard, $15.49-a-month ad-free plan.
Ad-backed tiers of service are growing faster than ad-free plans, new data from Antenna show.
“If there’s an ad option, I’ll take it," said Edward Taylor Connor Jr., 33 years old, of Florida, who pays for Hulu with ads as well as Netflix’s soon-to-be retired DVD service and its ad-supported plan. “It just doesn’t bother me," he said.
People who paid for ad-supported tiers generally remained subscribers longer than those who avoided them, Antenna found, based on customer-retention rates across premium streaming services over a 12-month period.
There were no meaningful demographic differences in terms of ethnicity, gender, income or age between people who avoided, accepted and managed ad-supported tiers of service, according to Antenna.
The trend of customers managing when they do and don’t pay for ad-supported services means there are pockets of customers that advertisers can reach only on one service, Antenna said.
For example, of the Hulu customers who accept ads, 74% don’t have any other ad-supported premium streaming services, meaning the Disney-controlled streaming service is the only way advertisers can reach them, Antenna found.
Still, some consumers are likely to remain out of reach for advertisers looking for streaming audiences, even if the viewers have to pay more for subscriptions.
“They’re just an insult to my intelligence," said Mark Libman, 67, who lives in a rural area south of Asheville, N.C. His subscriptions include ad-free versions of Netflix and Warner Bros. Discovery’s Max as well as Amazon’s Prime Video. “They couldn’t pay me to watch ads," he said.
