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Increasingly, video streaming doesn’t mean ad-free

by Jeff Loucks, Kevin Westcott
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    3 minute read

    Increasingly, video streaming doesn’t mean ad-free US consumers are turning to ad-supported streaming services to stretch their entertainment dollar

    3 minute read
    • Jeff Loucks United States
    • Kevin Westcott United States
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    TV watchers are increasingly spending time with ad-supported streaming services—they like much of what they see, and the price is right.

    Close to half of US consumers now use a free ad-supported streaming video service

    In the United States, there are more than 300 streaming-video services that allow viewers to pay a subscription to watch TV shows and movies without having to see ads.1 Eighty percent of US households now pay for at least one of them; the average subscriber has four.2

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    But another business model has been gaining momentum among US consumers: free streaming video services that viewers can watch without a subscription. It costs them only the time it takes to watch ads—a familiar tradeoff for anyone who grew up in an era before cable TV.

    According to Deloitte’s Digital media trends survey, 14th edition,3 47 percent of American consumers are watching free ad-supported video services such as Pluto TV, Tubi, and the Roku Channel, up from 40 percent before the start of the COVID-19 pandemic.4 That’s 18 percent growth in a matter of weeks.

    Unsurprisingly, people most often cite cost—or lack thereof—as the key reason to watch free-ad-supported video. And once consumers start watching, many like what they see. Thirty-seven percent of consumers say they appreciate the broad range of shows and movies available on free services. An equal percentage like the convenience of accessing free ad-supported services on smart TVs and streaming media devices such as Fire TV Sticks, in addition to smartphones and laptops. Unlike with paid services, viewers can start streaming immediately without a credit card and often with no login.

    Free streaming services have ad loads that consumers appear to find reasonable. The average consumer says seven minutes of ads per hour is “about right” and that they stop watching a show when the ad load reaches double that.5 Most free ad-supported streaming services hit the sweet spot, ranging from five to eight minutes per hour6—far less than traditional broadcast TV, with hourly ad loads of 14 to 18 minutes.

    In short, many consumers see ad-supported TV as a free, high-quality, convenient entertainment option.

    Implications for media executives

    As budgets tighten, consumers could rely more on free video streaming. Thirty-nine percent of consumers—including 43 percent of free ad-supported viewers—say their household has lost income since the pandemic hit the United States.7 Many cash-strapped consumers have already looked to trim their subscriptions to make ends meet. For example, Gen Z and Millennials have an average of 5 streaming video subscriptions—and a third are worried about making upcoming payments.8 Free ad-supported services are unlikely to replace paid services altogether, but viewers may rely on them more if times get tougher.

    Consumers want ad-supported options—and the market may need them. In Deloitte’s latest Digital media trends survey, 65 percent of respondents said they’re comfortable watching ads to eliminate or reduce subscription costs—and that, given a choice, they prefer ad-supported options for watching streaming video services.9 Some services are paying attention: Hulu offers a lower-priced ad-supported option, and over 70 percent of subscribers choose it;10 Comcast, which owns NBC, is launching Peacock in July 2020 with a free ad-supported option.11 Other services may need to launch free and reduced-price ad-supported options to remain viable given the intense competition for subscribers—and dwindling ability to pay.

    Free ad-supported video appeals to thrifty Boomers. The main benefits of free-ad-supported video—cost, content, and convenience—appeal to Boomers more than to any other generation. Boomers grew up on traditional broadcast and pay TV, and they’re comfortable trading their time and attention for entertainment. Free ad-supported services could get those who haven’t started streaming off the sidelines.

    Acknowledgments

    Cover image by: Viktor Koen

    Endnotes
      1. Kevin Westcott et al., Digital media trends survey, 13th edition, Deloitte Insights, March 19, 2019. View in article

      2. Kevin Westcott et al., Digital media trends survey, 14th edition, Deloitte Insights, June 23, 2020. View in article

      3. Ibid. View in article

      4. There are several acronyms for streaming video services that describe slightly different business and distribution models. With ad-supported video on demand (AVOD), consumers can watch a show or movie when they want. Free ad-supported streaming TV (FAST) has live TV programming instead of, or in addition to, on-demand content. Finally, some ad-supported services use ads to reduce the price of subscriptions. Hulu has an ad-supported tier, for example. In this charticle, we focus on free ad-supported streaming services, whether they’re AVOD, FAST, or some combination thereof. View in article

      5. Westcott et al., Digital media trends survey, 14th edition. View in article

      6. Interview with Tubi’s Farhad Massoudi, Indian Television, January 23, 2020. View in article

      7. Westcott et al., Digital media trends survey, 14th edition. View in article

      8. Deloitte, Deloitte State of the Consumer Tracker. View in article

      9. Westcott et al., Digital media trends survey, 14th edition. View in article

      10. Todd Spangler, “Hulu says 70% of its 82 million viewers are on ad-supported plan,” Variety, May 29, 2019. View in article

      11. Megan Graham, “NBCUniversal’s Peacock has a buffer against ad slowdown with launch partners,” CNBC, April 21, 2020. View in article

    Show moreShow less

    Topics in this article

    Technology, Media & Telecommunications , Media & Entertainment

    Technology, Media & Telecommunications

    Deloitte’s Technology, Media & Telecommunications (TMT) industry practice brings together one of the world’s largest group of specialists respected for helping shape many of the world’s most recognized TMT brands—and helping those brands thrive in a digital world.​

    Learn more
    Get in touch
    Contact
    • ​Kevin Westcott
    • Principal, US Telecom, Media & Entertainment lead
    • Deloitte Consulting LLP
    • kewestcott@deloitte.com
    • +1 213 553 1714

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    Jeff Loucks

    Jeff Loucks

    Executive Director | Center for TMT

    Jeff Loucks is the executive director of Deloitte's Center for Technology, Media & Telecommunications, Deloitte Services LP. In his role, he conducts research and writes on topics that help companies capitalize on technological change. An award-winning thought leader in digital business model transformation, Jeff is especially interested in the strategies organizations use to adapt to accelerating change. Jeff’s academic background complements his technology expertise. Jeff has a Bachelor of Arts in political science from The Ohio State University, and a Master of Arts and PhD in political science from the University of Toronto.

    • jloucks@deloitte.com
    • +1 614 477 0407
    Kevin Westcott

    Kevin Westcott

    Vice Chairman | US Tech, Media & Telecom Leader

    Kevin Westcott is a vice chair and leads the US Technology, Media & Telecommunications (TMT) practice of Deloitte; as well as serves as the global Telecommunications, Media and Entertainment (TME) practice leader. Kevin has more than 30 years of experience in strategic and operational planning, as well as implementing global business change and technology projects for major telecom and media organizations. His industry experience spans film, television, home entertainment, broadcasting, over-the top, publishing, licensing, and games. Kevin is an author of Deloitte’s Digital Media Trends Survey a co-author of Deloitte’s Digital Media Maturity Model, and speaks regularly on media consumption trends.

    • kewestcott@deloitte.com
    • +1 213 553 1714

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