Video streaming

Advertising subscriptions are becoming increasingly popular

Advertising subscriptions are increasingly conquering the streaming market.

(Bild: stock.adobe.com)

Advertising while streaming and discounted subscription prices in return? Such offers are becoming increasingly popular. The number of ad-financed subscriptions to market leader Netflix has recently tripled in Germany, according to a recent streaming study.

According to the management consultancy Simon-Kucher, more than one in five (22%) people in Germany already use an advertising subscription. At Disney+, 14% and at Netflix 20% actively opt for an advertising subscription. In Germany, the streaming market leader does not yet offer an ad-financed subscription, but it is expected that the basic subscription currently available for EUR 7.99 per month will be replaced by a corresponding offer this year.

Three out of four Prime users pay for ad-free streaming
According to the study, the number of advertising subscriptions for Amazon Prime is similar to that of the competition at 23%. The special thing here: Users have to pay a surcharge for streaming without advertising. A full 77 percent of customers use this option. "The fact that three out of four Amazon Prime users pay a surcharge for ad-free streaming is remarkable!" emphasizes Lisa Jäger, Partner and Managing Partner of Technology, Media & Telco at Simon-Kucher.

Advertising subscriptions are becoming increasingly popular.

(Bild: Simon-Kucher)

Netflix advertising subscriptions have tripled
However, advertising subscriptions are increasing "rapidly" at Netflix in particular, says Jäger. Compared to 2023, the number has tripled. "The streaming giant is experiencing significant growth - also driven by price pressure from users."

Advertising subscriptions are still in the test phase
Is this the triumph of advertising subscriptions? Not necessarily: "Despite Netflix's soaring popularity, the idea of compensating for lost revenue by offering less expensive, ad-free subscriptions with more advertising revenue doesn't always work out," says Jäger. "It is possible that individual advertising subscriptions will be taken off the market again."

Many providers are still in a test phase. According to earlier study results, purely free services such as Amazon's Freevee even showed a downward trend. "So it's all the more exciting that the media are reporting that Netflix could soon launch a free, ad-financed streaming service."

Netflix is cannibalizing itself globally with advertising subscriptions
On a global level, Netflix is even increasingly cannibalizing itself with advertising subscriptions. The streaming study shows that the number of users who switched from a more expensive Netflix subscription to a cheaper advertising subscription rose from 42% to 46%. For Disney+, on the other hand, it fell sharply from 52% to 36%.

At regional level, however, the results could be very different. "The Disney+ advertising package is still too young in Germany to make reliable statements," explains Sophia Felgner, Director at Simon-Kucher. "While it attracts numerous new customers on a global level, Disney+ could suffer a similar fate to Netflix in Germany."

Although the Netflix advertising subscription launched in our northern neighbors in 2022 is attracting more and more users, it also has an even higher cannibalization rate than on an international level.

Sharing restrictions drive freelance streamers towards advertising subscriptions
According to the study, however, the timing of advertising subscriptions could hardly be better. Sharing restrictions have already caused the proportion of account co-users to drop to 20%. Almost half (47%) of users who are no longer able to share subscriptions with friends due to restrictions are prepared to take out a subscription themselves. Advertising subscriptions are an "ideal entry-level product", according to the report.

Advertising acceptance can also be controlled: one in two people (50 percent) find that knowing the remaining advertising time makes it easier to wait during the commercial break. In terms of ad placement, pre-stream advertising without interruptions during the stream is the favorite among users. However, the more interruptions there are, the less popular the commercial break becomes.