Although there has been much analysis of expanding ad-supported streaming platforms, consumer spending on streamers -- subscription fees -- keeps rising.
Brian Wieser, veteran media analyst and writer of Madison & Wall, a Substack column, says this:
“While there are many observers who have opined that consumers are dropping or are likely to drop their streaming services as prices rise -- whether for ad-free or ad-supported offerings -- total [consumer] spending on streaming services is consistently rising."
That number is around $35 billion a year. And while cord-cutting continues to loom over the traditional pay TV business, all isn’t lost yet. It remains at a high level -- around $100 million, down from $110 billion in 2017.
For many premium streaming platforms, it's all about offering options. Recently Amazon Prime Video decided to offer a limited ad-supported option to its service.
Why the rise then in subscription revenue? Because heavy TV-streaming users -- such as those on Prime Video -- will continue to look for ad-free experiences, and will spend more to get it.
Along with the announcement that Amazon will be offering the ad-supported option, it also said that it will be offering an additional ad-free “upgrade” for $2.99 more a month in the U.S.
“I am persuaded by the idea that when given the option, most consumers will pay for ad-free experiences if they are consuming a lot of a service,” says Wieser.
He thinks perhaps by the end of 2024 only a quarter of Prime Video subscribers might pay up for the ad-free upgrade but these will be the heaviest consumers of the platform.
This means “lighter” streaming users -- including those that watch those free, ad-supported platforms like Pluto TV and Tubi, with mass appeal -- will continue to avoid any or all monthly fees.
‘The less intense a consumer's relationship with a service, the more likely they will stay on an ad-supported tier, so long as they maintain their subscription.”
So if you are restless big brand advertiser trying to figure out your future media plans, what does this mean to you?
Perhaps very little. Advertisers looking for new alternatives to the declining influence of linear TV ad inventory will continue to struggle to get the reach they need.
“I remain doubtful that the news meaningfully alters the industry's long-term trajectory.” There will be “no change to long-term challenges for ad-supported TV.”
And the struggles for the premium streamers as well will continue in seeking profitability. If that's not enough analyst say there is a 41% chance of a recession in mid-2024.
Happy media planning.