The latest research from Ampere Analysis has found that almost one in five US internet users are accessing AVoD (Ad-supported Video on Demand) services.
Based on Q3 2020 figures, 17% of Internet users in the US used one or more AVoD service in the prior month, up from 13% in Q3 2019. The rise of AVoD services has been spearheaded by Fox-owned Tubi whose considerable catalogue size is larger than that of Netflix. Like SVoD services before them, AVoD platforms look set for meteoric rise. But AVoD audiences are different – older and more likely to be from low income households than their SVoD user counterparts.
AVoD services offer viewers free-to-stream content with advertisements to generate revenue. Revenue streams have been under pressure in 2020, as advertisers pulled back on spend. However, the major AVoD services are still nascent, and now—following a series of acquisitions—they are largely backed by well-funded media and technology firms. As a consequence, Ampere does not anticipate COVID-19-linked ad-demand issues will be a fundamental issue for the groups.
Although SVoD services in the US currently have higher numbers of monthly active users, Ampere’s latest wave of its regular Consumer tracker found that in Q3 2020, nearly one in five consumers (17%) watched an AVoD service in the prior month. The increase in users from the previous year suggests a growing appetite for these platforms.
These free AVoD platforms are also able to offer catalogue sizes similar to the major SVoD platforms in the US. Among the most popular AVoD platforms, Tubi offers more than 29,000 titles, over five times as many movies as Netflix. It’s beaten only in terms of overall catalogue size by Amazon Prime Video.
These large and diverse catalogues are crucial for AVoD services to ensure regular engagement, as advertising revenue is highly dependent on user consumption – a contrast to subscription VoD services which can subsist on smaller catalogue bases, providing key titles are sufficiently high profile.
Minal Modha, Consumer Research Lead at Ampere Analysis says: “The Video on Demand market continues to expand and fragment, offering viewers more choice of platforms. Free ad-funded platforms will find themselves well-positioned to attract an audience that is either unable or unwilling to pay for multiple subscriptions. Despite some resistance to the high levels of advertising on US broadcast channels, 44% of consumers in the US still say that they don’t mind seeing advertising on TV, so AVoD services are quickly filling a market position.”
Despite their similar catalogue size, and the growing user base on AVoD, Ampere believes that the two platforms aren’t competing for exactly the same audiences. Active AVoD users tend to be older than SVoD subscribers, and are more likely to be from lower income households.
25% of AVoD users are aged 45 to 54 versus 22% of SVoD viewers, and 19% of AVoD users are aged 55 to 64 versus 14% of SVoD subscribers.
Nearly half of US AVoD users have an annual household income of less than $30,000 per year, compared to a third of SVoD users.
Almost one in five AVoD viewers live in households with annual earnings of less than $15,000 per year.
Minal Modha, Consumer Research Lead from Ampere Analysis says: “With distinct audiences, we believe that these two offerings aren’t competing directly with each other but rather can coexist. We have seen some companies offer both a free and paid-for tier, such as Amazon’s Prime and IMDb TV, Hulu and NBC’s Peacock. In the current climate with both economic uncertainty and a greater need for people to stay at home, we expect the use of AVoD services to continue to rise as more consumers will be turning to these platforms as they seek entertainment without increasing their financial outlay.”