Interest in Ad-supported Services to Continue to Rise

Parks Associates expects the interest in ad-supported services to continue to rise, primarily for two reasons. First, the concept of little-to-no cost resonates with all consumers, regardless of their content tastes or income level. Free content is also of higher appeal during times of economic difficulties, such as current inflationary pressures and increased price sensitivity among consumers, so that they feel they have viable content options should they feel a need to cancel or reduce their number of subscriptions.

Parks Associates estimates 37 million US internet households watch ad-supported (AVOD/FAST) streaming services in 2022.

The surging popularity of FAST services and streaming video, in general, contributes to a fragmented media environment, which makes monetizing FAST channels more challenging as the audience is no longer focused on one service or even on the same device. Broadcasters and content owners must optimize audience reach while delivering quality content across an increasing number of connected devices and platforms. FAST channels can increase their competitive advantage in advertising by incorporating additional capabilities that can work across multiple device ecosystems while delivering targeted and relevant advertising to the viewer by leveraging data sets to deliver a personalized ad experience centered around the user.

FAST channels with these advantages can also leverage their positions to attract more premium content to their services. The standard perception among content owners has been to equate premium content with SVOD services, but the popularity of FAST is changing that bias. These channels are delivering larger and larger audiences, and with the right mix of personalization services, they can attract top-tier content and ensure it is served to receptive viewer segments, accompanied by the right targeted ads.

The Role of Content and Reducing Churn

To secure those ad revenues, services need to be able to retain viewers long term. Content is the most significant factor influencing consumers’ viewing decisions from beginning to end. Content is the primary trigger for subscription sign-up, followed by free trials. According to Parks Associates data, two of the top five drivers of OTT subscriptions are related to content. Additionally, not finding the right content or running out of content to watch are two of the top five reasons for people leaving or churning away from a service. Twenty-seven percent of those canceling an OTT service report doing so because they finished watching the shows they liked.

The OTT subscriber churn rate is currently at 48%, reflecting a rising trend since 2018, so driving and sustaining engagement is more important than ever in the streaming industry.

FAST channels share the same goals of retaining viewership and targeting people before they turn away from their service, either to other channels or FAST services. Personalization can add two dimensions: recommending content based on preferences; and localization, in which local content such as news and weather is infused into a generic playlist to create regional variations. By personalizing FAST services, providers can target viewers who may be drifting and direct them to new, unviewed, or pending content that will reinvigorate their interest and increase engagement.

This is an excerpt from new research release in partnership with Quickplay . Thank you for support of Parks Associates research. We welcome any comments or feedback.