Consumers and Ad-Supported Streaming: Looking Forward to 2023

With more and more (maybe even soon all) streaming services including an ad-based model, have consumer feelings on watching ads changed? And how does the current state of the economy factor into their opinions?

The Streaming World Looks toward 2023

If there’s one thing that 2022 will be remembered for in the world of Connected TV, it’s that this was the year that almost every streaming service joined the ranks of the ad-supported—HBO Max launched lower priced ad-supported tier to their platform in June, Disney+ has plans to do so in December, and even the (formerly) staunchly anti-ad platform of Netflix changed their tune, launching their own ad-supported tier just this month. 

This year, we also saw CTV as a whole rise in popularity among consumers, with viewers reaching 225.7 million (around two-thirds of the U.S. population). And while according to eMarketer that leaves little room for growth, next year we can expect that number to reach around 230 million—a 1.9% increase over the users added this year. But with 2022’s tumultus economy hanging over many consumers as we head into a new year, how will that affect the way streamers feel about CTV in this new ad-supported world?

The Economy is Pushing Streamers to Ad-Supported Content 

This year, rising inflation and fears of a recession caused many streamers to reconsider the way they watch their favorite content on Connected TV. Many have been searching for ways to cut costs where they can, but are unwilling to give up streaming completely. Enter: ad-supported streaming.

A study from LG Ads Solutions found that around 80% of consumers use ad-supported models of Connected TV, and 67% indicated that they even prefer those models over subscription-based CTV services. In fact, many consumers have been attempting to reduce their paid subscription count—30% of respondents said their household removed a paid CTV subscription this year, and 25% said they replaced it with a free, ad-supported service. Another study reiterated that consumers are looking to pay less for content—Simon-Kucher found that 75% of those consumers who have canceled a subscription this year would reconsider for a lower subscription fee—even if that meant trading that fee for ad-supported content.

This growth in AVOD subscriptions can also be attributed to the fall of Pay-TV—as more and more consumers cut-the-cord on cable to save money, many of them are turning to ad-supported CTV content to replace it. eMarketer estimates that by the end of 2023, households that don’t pay for TV will outnumber those that do.

Streamers Are Fine With Ads—But With Some Caveats

With so many streaming platforms including ad-supported content and many consumers signing up for these lower-cost (or even free) tiers, how do streaming viewers feel about CTV ads going into 2023? 

The general sentiment about ads among consumers is neutral (to maybe positive). A study from Amazon Ads and Omnicom Media Group found that nearly seven out of ten consumers believe that watching ads is just a normal part of the viewing experience of a streaming experience. And 71% of streamers don’t mind watching ads if they can watch their favorite shows and movies for free. Streamers also expect their CTV ads to be a seamless part of their viewing experience—68% enjoy seeing ads that relate to the content they are currently viewing, and 73% think ads are more enjoyable when they feel personally relevant.

Not all streaming viewers, however, are completely satisfied with their ad experiences on Connected TV. An online survey conducted by The Harris Poll for Ad Age found that many of the respondents (81%) were irritated by the frequency with which they see ads, and 75% said streamers feature too many commercials (despite the fact that streaming has much lighter ad loads than linear TV). 

But there are ways streaming services can improve the ad experience for CTV users to make it more likely that they will continue to watch ad-supported content for the foreseeable future:

• To combat ad-fatigue, AppsFlyer notes that on average consumers are happy to watch 1.8 ads per 30 minutes of content. And that number rises 220% to 5.8 ads if their content is relevant to the viewer.

• Another option, provided by Ad Age, is updating ad-supported platforms with more interactive ads—giving consumers the power to control their ad experience. The majority of those surveyed said that they  would participate with a QR code or on-screen interaction in exchange for an ad-free viewing experience for the rest of the film or episode. 

• Consumers are also interested in seeing more bundled streaming options. The current fragmentation of the streaming ecosystem can be frustrating for many consumers, and bundles would help consumers manage their streaming services all in one place. The Harris Poll found that 38% of CTV viewers would like more platforms that allow users to bundle content from other streamers (such as Amazon Prime Video or Apple TV) and a third found bundled platforms preferable to combat the current scatter of the streaming market. The survey also found that younger viewers were even more likely to be in favor of bundled streaming content. 

Conclusion

The truth is, many consumers cannot justify the rising costs of streaming without ads, and as a result have been turning to ad-supported platforms to save costs. But while this compromise has been a good way to ensure a balance of interests between CTV platforms and streamers, many consumers are looking for some changes to their viewing experience as we head into a new year.