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Hybrid shock How ads will change SVOD

Report by Tim Mulligan
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20,000 foot view:  The combined effects of market saturation for subscription video on demand (SVOD) alongside a growing cost-of-living crisis are forcing pureplay SVOD services to modify their ad-free propositions. Disney-owned Hulu has demonstrated the viability of an ad-supported SVOD basic plan, which now offers a blueprint for Disney+ and Netflix. The passive tolerance of ads among most SVOD users, and the increasing importance of ad-familiar silver streamers, will offset short-term churn risks. However, video subscribers over-index for disengaging with ads, highlighting the brand reputation risks. With Apple TV+ now the sole only-ad-free paid video service with global reach, implementing ads into paid video subscriptions increases the disruption risk for incumbents for SVOD services that go down the ad route.

Key insights 

  • Ad tolerance            SVOD services is currently high            video subscribers, with only            outright            to ads in their paid            services
  • Netflix’s engagement            gives it greater flexibility for            ad-insertion engagement disruption than leading            such as Disney+
  • However, subscribers            all leading video services over-index            TV and online video ad            i.e., either skipping or ignoring           
  • Older demographics            less ad averse in SVOD            younger demographics
  • Over            are            more likely to be price            to existing subscription offerings
  • Ad apathy            digital natives will be tested            long-form video becomes impacted
  • Apple TV+            be the surprise winner by            Netflix’s ad-free brand reputation 

Note: MIDiA defines hybrid SVOD as subscription video services that include an ad-supported subscription tier

Companies and brands mentioned in this report: Alphabet, Amazon, Amazon Firestick, Apple TV+, Barlow and Bear,            Century Fox , Comcast, Disney, Disney+, HBO Max, IMDb TV, Paramount, Paramount+, Prime Video, Netflix, Prime Video, Snap, The Unofficial Bridgerton Musical Album Live in Concert, Time Warner, Twitter, Warner Bros. Discovery

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