While the global revenue of advertising-based video-on-demand (AVoD) platforms is expected to reach more than US$546 billion over the next five years, the ad-supported business model appears to no longer be serving them as many are now turning to subscriptions for their continued survival, according to a new report from Bristol, U.K.-based analyst firm Rethink Technology Research.
“By 2029, subscription revenues will make up almost half of user-derived revenues for AVoD platforms, with advertising revenues holding a shrinking lead of just a few percent,” says a summary of the new Rethink TV report (subscription required).
“In part this has been caused by the rise of SVoD-with-ads. In a bid to keep subscription fatigued users who are feeling the pinch of economic turbulence, basically every major SVoD platform (except for Apple TV) now offers some sort of discounted ad-supported tier.
“Add to this the rise of FAST platforms like Tubi and Pluto TV, and suddenly the classic AVoD platforms are being slowly squeezed out of the OTT video advertising market. This has forced a strategy that is the mirror image of the SVoD story — AVoDs are now trying to double down on subscriptions,” the report says.
Although the drive for paid subscribers may have questionable merit — due to the aforementioned subscription fatigue felt by most consumers — it is undeniable that paid subscriptions generate far more revenue than free users, the report says.
“By 2029, we predict that a free user on an AVoD platform will generate just $8 on average. By contrast, a paid sub will generate $39,” Rethink TV says in its report.
The largest AVoD platform is Google’s YouTube, which currently holds 44 per cent of the world’s AVoD monthly active users (MAUs) and 62 per cent of the global AVoD watch time, according to Rethink TV. Five Chinese AVoD platforms — BiliBili, iQIYI, Le.com, Tencent Video and Alibaba’s Youku — collectively make up 40 per cent of the global AVoD MAUs, Rethink TV says.
Other AVoD platforms examined in the report include Sony’s anime-focused video service Crunchyroll, Vivendi’s Dailymotion, Fandango at Home (Vudu), Indian video service MX Player, Rakuten-owned Viki, PCCW-owned Viu, and Viacom18’s Voot.
Rethink TV says it has chosen to examine AVoD, SVoD and FAST platforms in three separate reports, with the AVoD forecast being the first of the three.
“Our SVoD forecast will include any of the large global platforms that arrived with Subscription-only models to begin — Amazon Prime Video, Apple TV+, Comcast’s Peacock, Disney+, ESPN+, Hulu, Netflix, Paramount+ and Warner Bros. Discovery Max.”
Rethink TV says it decided to delineate an AVoD service as one that is focused on titles, while a FAST service is channel-focused.
The SVoD and FAST reports are expected to be released in the first half of 2024.
