Streaming services with ad-supported plans outpace ad-free tiers

Parks Associates released new findings on the state of the U.S. video market during its eighth annual Future of Video: Business of Streaming conference.

The research firm’s “S.O.S. State of Streaming” report, produced in partnership with Adeia, Broadpeak, Philo, Skreens, Sling TV and InterDigital, highlights significant shifts in how U.S. households access pay-TV services. According to the firm, nearly 50 percent of U.S. pay-TV households now receive their service through internet-delivered platforms.

Traditional pay-TV providers still account for 42 percent of U.S. internet households, but virtual multichannel video programming distributors (vMVPDs), serving 25–30 percent of households, and ISP-based streaming bundles, serving 20 percent, are narrowing the lead.

“Consumer choice dictates the future of video,” the firm stated. “Success will depend on adapting to shifting behaviors and maintaining trust across the value chain.”

U.S. viewers now watch more than 40 hours of video each week across various platforms, according to the report. The majority of viewing time — more than 21 hours — takes place on television screens, though mobile device usage has steadily increased over the past five years.

Research from Parks Associates also showed that ad-supported tiers are becoming the default choice for many American streaming subscribers. Services that launched with ad-supported options from the outset have higher adoption rates for those plans compared to ad-free tiers.

Peacock and Hulu had the highest percentages of subscribers on ad-supported plans.

More than 75 percent of Peacock users and nearly 70 percent of Hulu subscribers watch ad-supported content. By comparison, fewer than one-third of Hulu users and under one-quarter of Peacock subscribers opt for the more expensive, ad-free version.

Advertisement

Amazon’s Prime Video was identified as a key exception. More than two-thirds of its viewers watch ad-supported content, a result of Amazon shifting all users to a default ad tier two years ago. Only 31 percent of respondents said they paid for the ad-free add-on.

The Future of Video conference brought together executives from companies including Wurl, Tubi, Xperi, Philo, TiVo, Sling TV, Verizon, LG and Warner Bros. Participants discussed strategies for securing long-term consumer loyalty and profitability as consumption patterns evolve.