As VideoWeek reported yesterday, new IPA data shows that the total reach of ad-supported subscription tiers on paid streaming services has tripled over the past year. But this growth has coincided with the launch of ads on Amazon Prime Video, which immediately achieved significant scale thanks to Amazon’s tactic of switching all users onto the ads tier by default.
New data today from Barb’s Establishment Survey helps complete the picture, showing that it’s not just Prime Video driving growth. Ad-supported tiers on both Netflix and Disney+ continue to grow at pace, with Netflix’s ads tier coming close to reaching 20 percent of UK households.
Ad-funded growth
Barb’s Establishment Survey tracks uptake of subscription video on-demand (SVOD) services across the UK, covering any streaming apps which reach more than five percent of UK households.
The latest data, from Q2 this year, shows growth across the market as a whole — something which hasn’t always been a given in recent years. In Q2, 20.6 million UK homes — or 69.7 percent of households — were signed up to at least one SVOD service. This was an increase of half a million over Q1.
Netflix and Disney both contributed significantly to this growth. Total Netflix subscriptions rose from 17.4 million households to 17.6 million in Q2, while Disney increased its reach from 7.3 million homes to 7.6 million over the same period.
In both cases, the ad tiers saw a net gain in subscribers, and offset net falls in ad-free tiers. Netflix’s ads tier reached 5.5 million households in Q2, up by around 700,000, while Disney’s reached 2.1 million homes, roughly 400,000 more than the previous quarter.
Much has been said about Amazon’s decision to default existing subscribers onto its ads tier when it first launched its ad-supported product. But it seems that new subscribers are opting for ads too. Amazon’s ads tier added 300,000 new households between Q1 and Q2, roughly the same as total growth in Prime Video’s UK reach.
Comparing the figures to last year, we see substantial growth for both Netflix and Disney’s ad offerings. In Q2 2024, Netflix’s ads tier reached just under 2.8 million UK households, meaning its reach has nearly doubled in the past year. Disney’s ad-supported subscription, meanwhile, reached 0.82 million UK homes in Q2 last year, meaning it’s clocked more than 2.5x growth in the past year.
Boiling frogs
The figures suggest that both Netflix and Disney+’s efforts to scale up their ads businesses are bearing fruit (while perhaps also validating Amazon’s much speedier approach). But total reach is just part of the equation.
All three of the major SVOD services have kept ad loads fairly light so far, in an effort to tempt users onto the ads tier. But to continue scaling their ad offerings, they may need to up their ad loads in time.
The question is whether they can do so without putting off their audiences. Introducing ads has so far proven successful at helping the streamers retain customers looking to cut costs, without sacrificing average revenue per user (ARPU). But if higher volumes of ads make the ad tiers less attractive, subscribers could choose to leave completely rather than opting for the cheaper subscription tier.
Follow VideoWeek on LinkedIn.
