FREE IS FIRE

But even among AVOD services, there are differences. Some offer a lower-cost subscription compared to premium SVOD, but still cost consumers money. In other cases, AVOD is completely free. The latter, free type of AVOD is what’s really shaking up the media ecosystem.

Feeling the Pinch

Why free, and why now? Well, for starters, it’s free. U.S. consumers maintain, on average, 2.9 streaming subscriptions per month and, according to The Stream 2024, spend $119.76 monthly between their streaming services and linear TV packages.

It’s a significant expense—more than most people spend on gas, even—and it’s only increasing. SVOD providers like Netflix, Hulu, HBO Max, Disney+, Amazon Prime Video, and NBC’s Peacock all upped the price of subscriptions in 2023 in an attempt to curtail significant losses and get on track to profitability, and we likely haven’t seen the last of these price hikes.

That trend has caused many consumers to take stock of their spending  and act accordingly. Nearly half of consumers (45%) report that high costs led them to drop at least one streaming subscription in the past year. All told, SVOD experienced a churn rate of 5.1% in 2023, with certain players affected more than others: Apple TV+, for instance, saw more than 7% of their customers churn in October 2023 amid an approximately 30% price hike. Paramount experienced similar rates of cancellations.

This retreat from paid streaming is probably not over. As reported in The Stream 2024, 62% of consumers said they prefer free ad-supported streaming over paid subscriptions, and more than half of Gen Z and Millennial consumers say they overspend on streaming. What’s more, 27% currently use more services than they plan to in the future. The factors most likely to catalyze a cancellation are subscription price increases (83%) and tiered subscription plans that put certain content behind additional paywalls (71%).

And while one might assume that the rush to free streaming is driven by cash-strapped consumers, that doesn’t appear to be entirely true. In the case of Tubi, which accounts for more viewing time in the U.S. than any other free TV and movie streaming service, viewership is 40% affluent. That means nearly half of Tubi’s 80 million monthly active users make more than $100k per year.

Two Ways to “Free”

With free ad-supported streaming on the rise, many marketers are leveraging its popularity to get their brands in front of larger and more diverse audiences. But there are two different categories of free ad-supported streaming that marketers should take into account when developing an advertising strategy.

• The category most marketers think of first is FAST, which stands for “free ad-supported streaming TV.” As a term, FAST is often associated with services like Pluto TV that function largely like cable television—that is, they offer linear channels and live content punctuated by ad breaks—but do so for free and over the internet.
• On the other hand, the FAST umbrella also includes free, primarily AVOD services like Tubi, which offer premium, on-demand video content in addition to linear, live TV experiences—making them not only an economical choice, but also an engaging and flexible choice, for cost-minded consumers.

Relative to other streaming services, advertising through either of these free ad-supported categories offers marketers a distinct advantage:

• First, the ad breaks are unskippable, which means consumers are likely to watch more of any given ad than they would on channels that offer the option to skip. That’s important because the longer consumers view an ad, the higher the sales uplift. No wonder, then, that the availability of non-skippable ads tops CMOs’ ad spend priorities.
• Second, since consumers pay nothing for these services, they are less frustrated by ad breaks, regarding them as a fair tradeoff for the cost savings. That may mean consumers are in a better mindset to be receptive to brand messages.

But there are also internal tradeoffs. For example, it could be argued that linear-type FAST (as opposed to AVOD-type FAST) viewing yields a more passive audience, since viewers exert less control over their content. That, in turn, could lead to lower attentiveness when it comes to ads.

On the other hand, when audiences watch on demand using a free AVOD service, they make a concerted effort to navigate to the exact content they want to see. That leads to more active and engaged viewing, with one study calling AVOD the leader of the streaming pack when it comes to audience engagement. That’s critical because high-attention channels offer brands a 65% uplift in important business outcomes.

It’s Free Time

As streaming services increasingly capture consumers’ viewing time, marketers are sending more ad dollars their way. But among streaming platforms, there are still plenty of ad spend decisions to make.

As consumer streaming habits continue to evolve, and free streaming content continues its upward trajectory, free AVOD, in particular, stands out as a sound investment thanks to the balance of benefits it offers to consumers and advertisers alike.

To learn more about consumers’ streaming behaviors, download The Stream 2024: Streaming Insights for Marketers.

Tubi is the world’s most watched free streaming service, accounting for 1.8% of all TV viewing in the U.S. With nearly 81 million monthly active users, Tubi is a hub for young, multicultural viewers not easily reached on linear TV or on other streaming platforms. Learn more about our advertising solutions for cord-never audiences at https://www.foxadsolutions.com/tubi/.