Though free ad-supported TV platforms (FASTs) are on the rise, Hub’s annual Monetizing Video study found that tiered services account for a greater share of preference than subscriptions with one advertising option only.
The study, conducted among 1,607 US consumers aged 16 to 74 who watch a minimum of one hour of TV per week and have broadband at home, explores the distribution models consumers perceive as most valuable and how they prefer to pay for content.
More than a year into the pandemic, consumers are using more TV providers than ever as giants like WarnerMedia and Disney+ release top content to their streaming platforms. Meanwhile, 82 percent of US households with a TV have at least one inter-connected TV device, including connected Smart TVs, stand-alone streaming devices, connected video game systems, and/or connected Blu-ray players.
As a result of these changes, consumers are getting closer to the amount they think is reasonable to spend on TV—namely, less. In 2020, Hub found that a majority of consumers cited $72 as a reasonable amount to invest in TV but actually spent $94 at the time. This year, Hub notes that most consumers view $73 as the sweet spot for TV spending but actually spend $85 on TV overall.
When tiered services are an option, no other choice gets a greater share, according to Hub’s research. As part of its survey, the firm divided respondents into two groups who were then tasked with choosing from three hypothetical streaming services with identical content.
Group one’s options were: a paid, ad-free subscription, a free-with-ads service and a paid, limited-ads subscription. Group two’s options were the same as group one’s except the limited-ads service was replaced with a paid service offering two tiers to choose from—ad-free and ad-supported.
Almost twice as many consumers picked the service with tiered options (36 percent) as the service with a limited-ad option only (19 percent). In addition, the limited ads-only service received a much lower share than either the paid ad-free service or the free-with-ads service.
The number of consumers choosing the tiered service, however, was just as high as the number of consumers choosing free-with-ads, and higher than the proportion choosing the service with only a single, ad-free option.
Tiered subscriptions could also increase the total addressable market, as Hub found that 40 percent of current HBO Max subscribers would consider switching to the ad-supported tier. More than a quarter of those who don’t subscribe to HBO Max said they’d consider signing up with a less expensive ad-supported tier as an option.
Hub also found that FASTs like Pluto TV and Roku Channel are gaining traction and this year have the highest perceived value of any kind of TV service, as noted by 66 percent of respondents. Sixty-four percent named subscription video on demand (SVOD) as a good or excellent value while 50 percent named virtual multichannel video programming distributor (MVPD) as a good or excellent value. Pay TV bundles ranked last, with 48 percent saying it’s a good or excellent value.
Aggregation presents a big opportunity for pay TV providers to gain more perceived value, as 66 percent who said their pay TV subscription is a good or excellent value watch SVOD providers through their pay TV set box; 45 percent of the same group don’t watch their SVODs through their pay TV set-top box.
For companies that offer more than just video, such as Amazon, high-quality content is considerably appealing. When Hub asked respondents the primary reason they signed up for Amazon Prime, 50 percent said it was to access shows and movies on Prime Video; the other half cited other benefits such as two-day shipping.
The opportunity for same-day-as-theater releases remains strong, as Hub found that during COVID, more than half of young viewers said they’d pay as much as $30 to stream a first-run movie.