Hybrid shock How ads will change SVOD

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