Ad-supported streaming continues to be one of the most important stories in the subscription video space as the market reacts to recent launches of ad tiers by Netflix and Disney+, and buzz builds around a potential launch of an ad-supported tier of Apple TV+. Three months into Disney+’s AVOD launch, Antenna analyzed the early traction for that product and provided an update on Netflix’s progress in the same segment.
According to Antenna, Disney+’s ad-supported plan is off to a faster start than either Netflix or HBO Max among new subscribers. In the first month of release, 20% of new sign-ups were to one of the Disney+ ad-supported plans, versus 9% for Netflix in its first month and 14% for HBO Max. By the third month, Disney+ reached 36%, compared to 19% for Netflix and 21% for HBO Max.
Netflix’s ad-supported plan is a bit different than the others because it is available only with the Netflix Basic plan. The Standard and Premium service tiers, which include additional features like concurrent streams and HD quality, currently do not have an ad-supported version. Looking at the portion of Netflix Basic sign-ups who are choosing the ad-supported plan, a different story emerges: in January, Basic with Ads accounted for 54% of all Basic tier signups for Netflix.
Meanwhile, the launch of the Disney+ ad tier had an interesting twist, as it was packaged with a significant price increase. Existing subscribers had a choice to either pay an additional US$3, pay the same price but switch to the ad supported plan, or cancel. Antenna found that 94% of Disney+ Premium plan subscribers took the price increase, 5% canceled, and less than 1% of existing subscribers maintained their current cost by switching to the ad-supported plan.
When looking at total penetration of ad-supported plans across the premium SVOD services that offer them, two insights emerge. First, consumers are clearly demonstrating that they are willing to choose advertising in exchange for a lower price. In Peacock’s case, for example, three out of four subscribers have the ad-supported plan, but across the board all services that have launched ad-tiers are seeing consumers opt-in to their ad-supported plans.
The second insight is that it takes time. The uptake of HBO Max’s ad-supported plan saw incremental increases among both new sign-ups and existing subscribers in the months following its launch, and that plan now accounts for 20% of all HBO Max subscribers. Disney+ and Netflix are also seeing similar incremental increases in the first months in market – Disney+ a bit faster than HBO Max, and Netflix a bit slower – suggesting that both services are headed towards accumulating meaningful audiences for advertising.
“Bottom line: while it is still early days for ad-supported premium SVOD, it is interesting to see multiple services experimenting with different offerings and pricing strategies, suggesting that there may be multiple paths towards profitability for video streaming services to take,” commented Jonathan Carson, Co-Founder & CEO of Antenna, and the author of the report.