Once again, Rethink TV has its finger firmly on the pulse and this new report arrives just as Netflix confirms its commitment to the rapid scaling up of ad-supported subscription tiers.
| SVoD & Ad-Supported Market Forecast - 2024-2029 |
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The collective SVoD services have shown a voracious appetite for the increased ARPU that ad-supported subscribers provide. In total, SVoD revenue is set to grow by 53.39% in our forecast period. By contrast, the ad-supported revenue proportion will increase by a staggering 134.76%.
Netflix co-CEO Greg Peters, who has overseen the launch of advertising, said during yesterday's earnings interview that Netflix doesn’t have a “set position on a ceiling" for subscription pricing. Rethink TV predicts that the SVoD services will continue to squeeze viewers, raising ad-free tier prices consistently. Which begs the question, could ad-free tiers then be removed entirely?
It has been a tumultuous year for the Subscription Video on Demand (SVoD) marketplace. The arrival of the advertising strategies at scale has shown strong uptake opportunities, but at the expense of the long-term uptake of SVoD. Lowering the prices has essentially made it less of an issue to churn, and so, while ARPU increases, the average length of subscription declines – as viewers hop more frequently between the services.
Put plainly, we have revised historic total subscriber counts downwards, while increasing the penetration rate of advertising-supported customers. In 2024, ad-supported user revenue comprises 26.22% of the total count. In 2029, this figure stands at 40.14%.
The SVoD services have shown a voracious appetite for the increased ARPU that ad-supported subscribers provide. This stands to reason, as the personalization opportunities for targeted advertising here are vast – combining title-specific ads with the demographic information that can be pulled from the billing details.
There are many wildcard decisions that could be made through the period, by the services. The wildest would be the complete elimination of their ad-free tiers, but it is clear that they view viewer aversion to ads as a lucrative opportunity. They will continue to squeeze these viewers – raising ad-free tier prices consistently, and removing ad-free tiers entirely.
In total, revenue grows from $93.42 billion in 2024 to $143.30 billion in 2029 – up 53.39%. The ad-supported revenue proportion grows from $24.50 billion to $57.52 billion, during this period – an increase of 134.76%, indicating the rising popularity of the ad-supported tiers.
Whether consumers are willingly choosing to move an existing subscription down a tier, or whether new customers favor the cheaper tiers is less clear – and the services are not in a hurry to break out that detail. The extensive consumer polling to determine that relationship is beyond the scope of this forecast, but it is clear that the services prefer their customers to see ads, owing to the better margins – with evidence suggesting new customers take ads.
There are long term questions over the advertising pricing and volume, which will be discussed in an upcoming report covering the technology powering that market.
This is the latest forecast in the Rethink TV Archive, which now includes:
- SVoD Market Forecast
- AVoD Market Forecast
- WiFi Market Forecast
- Operator Technology Choices and KPIs
- The Unstoppable Rise of Social Media Video
- Impact of Strikes and Inflation on Content Spending
- Set Top & Smart TV and Connected TV Device Operating System Forecast
- Media & Entertainment Codecs Market
- AVoD, FAST, and SVoD Market Forecast
- Sports Rights Forecast
- Investigating the Energy Use of Video Delivery and Consumption
- Video Delivery Market Forecast
- Open Internet Contribution Protocols Forecast
- Content Recommendations Software Forecast
- Low Latency Distribution Protocol Forecast
- Multicast-ABR Forecast
Rethink Technology Research is an analyst firm that has established itself over its 22-year history as a thought leader in 5G, and all forms of wireless; the entertainment ecosystem and streaming media; the Internet of Things; and has now embarked on the energy marketplace. Rethink TV is our video research team, producing market forecasts, technology white papers and tracking operator-technology vendor relationships in OTT video.
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| Rethink Research has been publishing, forecasting, consulting and ‘telling it like it is’ in the technology world, for more than 20 years. What our clients most like about us is our independent, non-biased research; regularly picking the brains of industry executives to provide our readers with no-nonsense insights that are impossible to find anywhere else. And, unlike other analyst groups, we don’t sugar-coat how tough the future will be. |  |
The report author, Rethink TV's Senior Analyst, Alex Davies, is available for comment/interview. Please contact roz@rethinkresearch.biz
