The Rise of Free, Ad-Supported Streaming Services


 

Although subscription services currently dominate the streaming TV market, free video streaming services are on the rise. Xumo had roughly 3.5 million active users at the end of July, while Pluto TV now has roughly 10 million monthly active users. Viacom’s recent acquisition of Pluto TV for $340 million is only expected to help boost these subscriber counts. Tubi recently announced that their viewership in 2018 was 4.3 times greater than the year before. Hulu also offers a cheaper version of their services that runs ads, which has 25 million subscribers.

Consumer Potential

The growth of these free streaming services comes at a time when consumers are increasingly purchasing and using CTV enabled devices such as streaming boxes/sticks, game consoles, and Smart TV’s. Consumers are beginning to hit their caps when it comes to choosing what streaming services’ they are willing to pay for, as they begin to feel the wrath of subscription overload.

Smart TV manufacturers such as LG, Samsung, and Vizio have also begun to add ad-supported streaming apps into their devices, even further reducing the barriers to entry when it comes to seeking out content. It is now a reality that consumers are picking a few streaming services they are willing to pay for and padding them out with other free services. The number of options for subscription streaming services are in abundance. Beyond Netflix, Hulu and Amazon Prime, cable-based channels such as HBO, Showtime, and Starz also offer a la carte subscription choices. As the SVOD market becomes more saturated, the next big-fix could be ad-supported streaming.

Adaptation

The success free streaming services are seeing in their ad-supported offerings and a recent forecast showcasing that Hulu’s ad revenue is expected to climb 25% this year to $1.82 billion, must have sole-subscription modeled services rethinking their own business models. Netflix reportedly being $20 billion in debt could qualify as one of these services but would have to tread very lightly in doing so to protect their brand identity and possible fall out of their price-sensitive subscribers.

A recent survey of Netflix subscribers said 23% would drop the service if it began including ads during shows. One way Netflix could avoid this while still taking advantage of ad revenue opportunities, could be to adopt Hulu’s multi-tiered subscription offering. Another obvious qualifier would be Amazon. They have already taken a huge step forward in moving towards this model in their recent launch of a free streaming IMDB video channel that is available on its website in the US and Amazon Fire TV Devices.  Oh yeah, and it’s ad-supported.