Ad-supported streaming brings new viewers to Netflix, Disney+

Dive Brief:

The majority of consumers who sign up for an ad-supported streaming plan are first-time subscribers, rather than pre-existing users downgrading their plans, according to new research from Samba TV and HarrisX shared with Marketing Dive.
A March survey found that 11% of Netflix users and 19% of Disney+ users have ad-supported tiers. Only 15% of these subscribers downgraded from a more expensive subscription, while the remaining 85% are new signups.
The findings demonstrate strong interest in ad-supported streaming, with 60% of consumers saying they would consider subscribing to a discounted service if it meant watching ads. They also show the channel’s potential to deliver incremental reach for advertisers.

Dive Insight:

As the streaming market continues to evolve, the strategy of introducing an ad-supported tier seems to be paying off for many providers. Both Netflix and Disney+ have seen an uptick in new subscribers — not just those who downgrade from another tier — a major marker of ad-supported success. However, ad-supported streaming from major providers such as Netflix and Disney+ is still in its infancy, and consumer preferences around costs, the amount of ads and ad-placement has yet to be fully understood.

The survey, which was conducted by HarrisX, analyzed results from 2,506 adults collected online between March 23 to March 27. Results were weighted by a variety of factors including race, income and mobile carrier.

The findings could spell trouble for linear TV, which is facing ad revenue challenges on a number of fronts.

“With more audiences flocking to ad-supported options and billions of impressions available every day, advertising dollars are primed to flow into new offerings that can prove incrementality with an equally devastating spiral for linear services that are saturating audiences with redundant, high frequency ad exposure,” said Ashwin Navin, co-founder and CEO of Samba TV in a statement.

The findings also showcase consumer preferences around ads in streaming content. Forty-two percent would prefer for ads to appear at the start of a program, 19% would prefer to see them towards the middle, 16% at the end and 23% would prefer a mix of all three. The majority, around half, would be fine with seeing two or three ads while watching but only 6% are okay with four or more advertisements.

However, 22% of consumers say these advertisements are highly disruptive, with 18% saying they are minimally disruptive. The survey found that men (25%), Gen Z (28%) and millennials (33%) were more likely to find ads highly disruptive. Additionally, 48% of consumers with ad-supported services saw repetitive ads, with women more likely to see repetitive ads.

Most subscribers would keep their subscriptions even if there was a price increase, per the research. A little over half for both, 52% for Disney+ and 55% for Netflix subscribers, would keep their subscriptions. Only 16% and 12% would cancel outright, while 18% and 19% would switch to a cheaper tier with ads, respectively.