What is the ideal percentage of ad-supported vs ad-free subscribers for a streaming TV service?
It’s a question that will be asked a lot once Netflix and Disney launch their ad-supported options.
The answer will likely be critical to the ultimate success of both services.
The easiest place to start looking for that answer is with Hulu, OG’s ad-supported subscription service.
While Hulu has never officially announced any actual number of ad-supported subscribers, most estimates have it at around 60% of its 46.2 million subscribers, that being the number for then-chairman Randy Freer. offered in a 2019 interview.
It’s a solid, credible number, and if you’re a brand marketer looking to run ads on Hulu, it’s reassuring to know that most subscribers could see your ads.
But here’s the thing: Hulu has had an ad-supported option since the day it launched in 2007. It only added the ad-free option later, in 2015. Which means they were starting from 100 percent ad-supported and working down. .
Netflix and Disney, on the other hand, are starting from scratch and working their way up. They will have to convince people to join the ad-supported service or to switch.
It will not be an easy task either.
Let’s start with the change. netflix is it is rumored that he is considering a $7-$9 price point for their ad-supported service, which is considerably less than the $15.49/mo people currently pay without ads.
His hope, no doubt, is that the lower price will convince all those “caps” (new graduates, grandparents, old boyfriends) who are still on someone else’s plan to sign up for one of their own. Maybe, but that’s going to be a hard sell, depending on how much (or in some cases, how little) Netflix watches that cohort.
Another hope, and perhaps more realistic, is to retain all those people who have been thinking about ditching Netflix because they don’t watch it as much anymore.
Yes, Netflix was essential when there were only three streaming services available. But now there are nine of them and most have very Netflix-like programming, not to mention deeper libraries. All of this can make spending $15 a month on Netflix, whose programming quality has been uneven at best, seem like a waste of money.
So the hope seems to be that at $7/mo, people who are “casual” Netflix viewers and sort of “meh” on the service in general can be convinced to stay.
New subscribers will be more difficult, at least in the US, where Netflix has a penetration of around 66%. (Compare that to smartphones, which have about 80% penetration.) I’m thinking just about anyone who’s ever wanted a Netflix subscription now has one and the lower price won’t move many additional hearts or minds. or credit card numbers.
Disney has chosen an even more difficult path.
They are raising the price of their original ad-free subscription from $7 to $11 and launching the ad-supported version at the old ad-free price ($7).
So the question is, if someone didn’t subscribe to ad-free Disney when it was $7, why would they subscribe to the ad-supported version at the same price?
It’s also a valid question, as Disney’s programming has remained pretty consistent in terms of what it is, and seems to fall into the “you or your kids like it or not” category. So unless they start rolling out something very different from their current IP-heavy fare (or an awesome live sports package), it’s unclear who they hope to attract.
One possibility is users who thought Disney Plus was worth $7 a month, but find the new $11 price excessive and, since they mostly watch kids’ programming (kids’ profiles will remain ad-free), switch to Disney Plus. with advertising is an easy decision.
But again, how many people fall into that category, and if they’re switching precisely because they’re only watching ad-free kids’ programming anyway, is that really a win?
From zero to 60?
When they launch their ad-supported options, the industry will be looking to see how long it takes Netflix and Disney to get to a viable ad-supported base.
In talking to various ad buyers, the consensus seemed to be that while Hulu’s 60% ad spend was ideal, the services would need to hit around 40% to be attractive options. The theory is that if only a third of your subscribers were on the ad-supported plan, buyers would be concerned that those subscribers weren’t representative of the subscriber base as a whole and would want to know more about their demographics and viewing habits. .
That said, there was some argument against even just 20% of Netflix’s 72 million subscribers still giving it a potential audience of 14.4 million viewers, which is nothing, and given the context of posting the In high-profile original ads, it would still be a worthwhile ad purchase.
So there’s that.
The issue really comes down to what shows those ad-supported viewers are watching and what kind of guarantees Netflix and Disney will make as to the number of ad-watching eyes on their originals.
While most streaming TV is sold programmatically, there is a strong assumption that ad slots on both services’ high-profile originals will be sold outright, given how desirable those slots are likely to be.
Which again brings us back to the question of how many ad-supported viewers will be watching those shows and what their demographics will be like.
That raises the even more pressing question of how desirable Netflix’s or Disney’s ad inventory will remain if their ad-supported base never exceeds thirty or forty percent, and how will that affect both companies’ finances and long-term plans? in particular. and the streaming industry in general?
Something to keep in mind in the coming months.