Combining free ad-supported content with a premium subscription tier is becoming a popular option for content providers in the US and the UK. Freemium recognizes that one business model does not fit all viewing circumstances.
UK’s ITV and Channel 4 praise the freemium approach
UK commercial broadcasters are embracing the idea of providing free-ad-supported content with a premium subscription tier. At Videoscape Europe, executives from ad-supported channels ITV and Channel 4 both agreed the combination of ad-free viewing and a subscription worked well together.
Steve Forde is Director of Digital Products and Online Marketing at ITV and is responsible for ITV Hub, the free ad-supported online TV service, and ITV Hub+, an ad-free subscription service. He explained the need for both approaches:
“The advertising model remains robust, but we see a change in viewer behaviors, driven by Netflix and Amazon, and a propensity for people to pay a monthly fee. They are learning the behavior of watching programming without advertising. We have to strike a balance, to keep the significant number of viewers who are willing to watch with advertising but offer a genuine alternative if you want to watch without.”
To reinforce the different value propositions, Mr. Forde went on to say that ITV Hub+ has 265,000 subscribers at £3.99 per month. However, the number of subscribers is a tiny proportion of those watching for free with ads.
All 4 is Channel 4’s online TV app. It has provided Channel 4 content free ad-supported online. However, Richard Davidson-Houston, Head of All 4, said the service would soon introduce an ad-free subscription tier also at £3.99 per month. He said adding the ad-free option was an acknowledgment that people want to watch in different ways, and it is All 4’s job to support that. Referring to two of Channel 4’s most popular shows, Gogglebox and Peep Show, he said:
“You might be very happy to watch yesterday’s episode of Gogglebox with advertising but perhaps not a whole box-set of Peep Show.”
Mr. Forde emphasized that the subscription tier is not just about avoiding ads. A subscription to ITV Hub+ also allows subscribers to download content for later viewing. Viewers can also watch when they are outside of the UK. As he said: “We have addressed different viewer pain points in this service.”
Amazon expands, renames IMDb FreeDive
In the US, Hulu has been very successful with a dual service model, though a customer still must subscribe to watch with ads. However, other providers are taking the same approach as the British broadcasters. Amazon introduced the free ad-supported service IMDb FreeDive early in 2019. Though separate to Amazon Prime Video, it is tightly integrated with the experience. For example, start watching a show on IMDb FreeDive, and it is automatically available in the Prime video interface.
Amazon continues to fine-tune the approach and bolster the
service. It announced last week that the service would be renamed IMDb TV. Also, the company claims it will triple the amount of content available over the next several months. New movies and shows from Warner Bros, Sony Pictures, and MGM will be joining the existing slate of TV shows. Films such as La La Land, Sense and Sensibility, and Draft Day will be available on July 1st.
As the SVOD space becomes more crowded, expect to see more services look to the freemium approach to lower the barrier to people watching and diversify revenue generation.
Why it matters
The SVOD space becomes ever-more crowded, making it increasingly difficult for service providers to convince customers to subscribe.
Service providers are looking to ad-free viewing to:
- Reduce the barriers to consumers using the service
- Boost content viewership
- Diversify revenue generation models