Originally published: The Australian Financial Review, 02 May 2022
Australians expect to pay less for subscription streaming services should they introduce advertising, rather than pay more to continue to receive the ad for experience they are used to.
Although customers would be willing to subscribe to an ad-supported tier of Netflix or Disney+, they would do so only if they received a discount of at least 20 per cent, according to research from Pureprofile.
“Subscription services launched at initial low prices and we’ve seen quite significant increases, 20 per cent-type increases,” said Pureprofile chief executive Martin Filz.
“Streaming services need to be careful regarding that cost limit because, at the moment, it’s not expensive to have multiple services at home. But with the rising inflation and cost of living, if they become too expensive (subscribers will) start eliminating.”
Netflix, the king of the streaming pile, stumbled last month when its announcement that it had lost 200,000 subscribers in the first quarter what about $US40 billion ($54.5 billion) off its share market value and prompted chief executive Reed Hastings to change his stance on advertising on the platform.
Although Netflix is yet to reveal what an ad-supported model would look like, Mr Filz said the research showed what users would expect if ads were introduced on Netflix or on its rivals.
“The assumption here is ‘I’m paying $9 a month for this particular streaming service, if they’re going to introduce ads, then I’ll pay more to not have ads’.
“But in fact, people are saying, ‘I would expect to pay less because now it’s been subsidised by advertises’,” he said.
A 20% discount on Australian Netflix subscription would be between $2.20 and $4.60 a month depending on which tier a user has subscribed to, dropping the basic subscription of $10.99 a month to $8.79, and the $22.99 plan to $18.39.
Having ads in a subscription service is a new a concert for Australia, but not unheard-of: Foxtel has had some ads across its channels despite subscribers paying a premium for its service.
Marc C-Scott, and a senior lecturer in screen media at Victoria University, says advertising funded video on demand has been growing in the US, but in Australia the model has been used only by the free to air broadcasters’ free streaming offerings such as 9Now, 7Plus and 10play.
“They’re getting an increasing number of subscribers and people accessing content on there. It is new to our market, in a sense, of subscription services providing ads, but it is something that will see here,” he said. “It could be in a couple of ways – it could be part of the user interface, or it could be part of that traditional TV model where we’re seeing ads during episodes.”
Younger customers – 15 to 24-year-olds – were the most likely to pay a premium to avoid ads on streaming services, the research suggests, and women were more likely to do so than men. People older than 65 were less likely to want to pay more to avoid advertising.
Australians pay on average $24 a month for streaming, and at least 10 per cent pay more than $50 because of the number of services used, the Pureprofile research suggests.
Netflix, Disney+ and Amazon Prime Video are Australia’s most watched platforms, it says.
This article was published by Miranda Ward in the Australian Financial Review on May 2, 2022
