The sustainability of ad-free subscriptions

A look into future of premium subscription accounts

02/20 By IAS Team

As CTV continues to grow in both ad spend and consumer adoption, streaming services will have to adapt their subscription models to compete in a market that is quickly becoming saturated with new platforms. Netflix has dominated the market with premium, original content and they won’t be toppled easily. So, the question remains: Will premium subscription accounts continue to keep people interested enough to continue paying for them?

Fragmentation Everywhere

It’s no secret that the connected tv landscape is a complicated new environment that poses a challenge for advertisers and publishers looking to taking full advantage of its opportunities. CTV is new to everyone, and with little to no standardization when it comes to, well, just about everything, the platform feels like a gray area. Advertisers know that this is a great opportunity, but capitalizing on it is another issue altogether. Plus, when they take into consideration that the most popular and successful streaming platform in the market today (Netflix) isn’t ad-supported, advertisers are still struggling to determine the best way to capitalize on it.

But advertisers and publishers aren’t the only ones struggling; customers are also left to navigate this new environment for themselves. For years, the only option was a costly cable subscription and now, for the first time, it feels like consumers can have the best of both worlds—pay for what you want and nothing you don’t. Publishers have capitalized on this idea, and with a noticeable increase of new streaming platforms being announced regularly, it’s easy to see how the simple “only pay for what you want” model can start to add up.

Price Matters

For most CTV consumers, there are clear subscription winners: Netflix, Hulu, Amazon Prime, and HBO. With just those four services, consumers are nearly paying the cost of a premium cable subscription. Not only are premium streaming services getting pricey, but because they are unbundled and sold at relatively innocuous price points, it becomes easy to set it and forget it. This inevitably leads to charges for unused subscriptions.

And this can become a problem for streaming services, as price is the number one factor consumers consider when thinking about adding on a new service. It’s known that if the content and user experience aren’t the quality customers expect, they’re more likely to cancel their subscriptions. So it’s becoming clear that streaming platforms will need to adapt to remain competitive. For example, Verizon offered a year of Disney+ free with a contract is potentially why it currently has 28 million subscribers in less than a year—it took HBO Now 3 years to hit 5 million subscribers. But, as more and more streaming platforms start to emerge and start to develop their own original content, they will need to consider moving to an ad-supported model in order to offset costs. And despite the popularity of the ad-free Netflix, viewers won’t seem to mind a few ads. In a recent study that IAS administered to CTV/OTT consumers, 76% of our sample said they would be willing to see ads for premium content. And, despite the continued and almost unstoppable growth in mobile, OTT content is still mainly viewed as a TV medium, with more than half of viewers consuming OTT only on television.

Of course, as CTV becomes the main way to reach viewers on the biggest and most important screen in their home, this bodes well for advertisers looking to take advantage and access potential consumers. As streaming platforms begin or continue to create their own content, costs for developing that content will grow and it is likely that subscriptions won’t be able to handle the costs alone. Ultimately, streaming platforms will need to turn to an ad-supported model to drive adoption. Otherwise, viewers are less likely to add on to their already overloaded streaming catalog.

IAS is the first and only partner to work directly with the largest video publishers to validate that video ads are played to completion, free from invalid traffic, on CTVs. Learn more about our CTV and Unified Video tag solutions now.