nScreenMedia OTT multiscreen media analysis

Four reasons why free-ad-supported online TV ripe for explosive 2019 growth

Pluto TV

2019 is shaping up to be a pivotal year for free-ad-supported online TV. Here are four reasons the market is ready for explosive growth.

Reason #1: The audience is there

Penetration of SVOD services will exceed 70% in the U.S. before 2019. As well, there could be 8 million homes with vMVPD subscriptions by the end of the year. Signs are people are using their online TV services a lot. The average Netflix home is streaming 1 hour and 15 minutes per day and the average Roku active user is streaming 2 hours and 50 minutes per day. Online TV sources are now so firmly embraced by viewers that 36% of pay TV customers say the main way they watch TV and movies is via online services.[1]

With viewers spending so much time watching online TV, they are sure to encounter other video services. Moreover, with no financial barrier, many will at least try an appealing free-ad-supported online (FASO) TV service.

Reason #2: There is a limit to subscriptions

There is no question that consumers are beginning to add more SVOD services. Ampere analysis reports that the average SVOD subscriber now has 2.6 subscriptions in the U.S. and 2.0 in the UK. People are spending more of their entertainment budget for online streaming services. The average US home with 1 or more SVOD services is now spending $35 per month for online video services.

Despite the rosy picture of SVOD growth, there is a limited number of services to which a consumer will subscribe. Moreover, subscribing to a service indicates a high-level of commitment to the content it provides. Like it or not, most people will not give that level of commitment to many services. However, between subscription-level commitment and complete disinterest lies a large middle ground where free-ad-supported online TV services can thrive.

Reason #3: Unified aggregation platform search

Discovery remains one of the biggest challenges for any online video service. Platform providers recognize this challenge and have begun to implement unified search features. For example, Roku, Apple TV, Samsung, and Amazon Channels all provide search across a variety of online video services available through their platforms. Increasingly, cross-service search results include FASO content as well.

Aggregation platform providers like Roku and Amazon Channels are actively pushing new video services to their users. Device interfaces include advertising for new services and content. Search results include new services with special deals to subscribe. These approaches and much more make it more likely users will find new video services of interest.

Reason #4: Platform providers featuring free-ad-supported video

Free-ad-supported video solves an important problem for platform providers. It gives them an opportunity to differentiate their device, and a reason for consumers to use their online video interfaces. For example, when a consumer that is already using a streaming media player like Apple TV or Chromecast buys a new smart TV, they have no incentive to use the TVs smart interface.

Samsung has recently added Pluto TV free-ad-supported channels to its TV Plus app on all newer smart TVs. When new owners connect the TV to their home Wi-Fi, they can immediately access standard linear TV channels without having to subscribe or login to any service.

Providers like Pluto TV and The Roku Channel are already taking advantage of the FASO TV opportunity. Moreover, they are already beginning to experience strong growth. The Roku Channel has become a top 5 channel on the Roku platform within a year of release. As well, in the last month, Pluto TV has expanded into the UK and will be available in other European countries soon.

Why it matters

Free-ad-supported online (FASO) TV has struggled in the shadow of the SVOD services.

Market conditions are shifting in favor of FASO TV:

  • Most viewers are watching online
  • They will not pay for everything they want to watch
  • Discovering new services is becoming easier
  • Aggregation platforms are starting to feature FASO services in their experience.

[1] Ampere Analysis, Navigating Content Chaos – A Roadmap for Pay TV operators, TiVo, Q3 2018, p3


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