The Cost of Streaming: Data on Audiences and Ads

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Ad-free TV was once the heart of SVOD platform’s value proposition. But by the end of 2022, all streaming platforms will offer some flavor of ad-supported content. What’s encouraging for everyone from Netflix to Roku is that audiences seem more than willing to embrace ads provided the ad load and relevance provides a better experience to that of cable TV.

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When it comes to consumers’ perceptions about ads, more important than the mere presence or absence of ads is the overall value they feel they get from the viewing experience, Hub Research finds in its latest report, “TV Advertising: Fact vs Fiction.”

That’s an intricate calculation that takes into account things like ad load, length of ad breaks, ad relevance, the overall service subscription fee, etc. “When ads are delivered effectively, viewers can actually be more satisfied with the overall viewing experience — and feel more loyal to the service — than viewers of ad-free content,” says Hub.

Ad-supported lower price SVOD tiers are growing alongside Free Ad-Supported TV (FAST), although the latter is growing more quickly than any other category. And for viewers squeezed by inflation, the appeal of free TV will only grow. FAST platforms are now investing in original shows, access to local stations, and other content that give viewers a reason to watch in addition to “it’s free.”

Streaming experts gathered for a round table discussion hosted by The Wrap said they expect the looming recession will push consumers into FAST, “long stereotyped as a haven for a financially struggling Gen Z audience.” As premium services pivot to include ad-supported tiers to offset subscriber churn and slower-than-predicted growth, FAST services like Pluto, Tubi and Amazon’s Freevee are well-positioned to begin including premium content into the mix.

The assumption that today’s viewers won’t tolerate ads appears misplaced. Per Hub’s survey of 3,000 streaming TV consumers in the US, more than half said they would choose an ad-supported platform if it saved them $4-$5 per month.

Content remains the most important consideration. A third of respondents said that they’ll watch ads to get access to the shows they want — two times as many who say they dismiss platforms with ads out of hand.

Even among those who rate themselves completely intolerant of ads, 27% will still watch them if it saves them money.

Streaming platforms currently provide a better ad experience than traditional pay-TV. According to Hub’s survey, all the major AVOD platforms score higher than shows from pay TV providers when it comes to an ad load that is “reasonable.”

Logically, serving up ads that viewers consider relevant will make the ad experience more positive all round.

Those who say they saw ads for products that seemed targeted to them or that were based on past purchases, were much happier with their recent viewing experience.

“Our research demonstrated that — contrary to conventional wisdom — a relatively small percentage of consumers say they can’t tolerate any commercials in TV content. But many in even that supposedly ‘ad-intolerant’ group say they’d sign up for a TV service with ads in order to save money.”