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Why higher-income households are diving into ad-supported streaming

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Holly Warfield / Getty / Shutterstock / The Current

Fifteen years after Netflix revolutionized the world by offering ad-free streaming, more and more consumers are back to watching ads. This time it’s through one of the bevy of streaming services with ad-supported tiers, like HBO Max, Paramount+, Peacock, Hulu, and soon, Netflix itself.

The emergence of more premium ad-supported streaming services has led more viewers, including higher-income households, to embrace the trade-off of watching ads to reduce the price of their monthly subscriptions.

Recent data from YouGov and The Trade Desk finds U.S. adults with a household income of over $80,000 are 14 percent more likely to watch ad-supported streaming on at least a weekly basis than those with lower incomes. This all comes down to cost and the increasing number of options, according to Nicole Sangari, VP of entertainment on demand for data analytics company Kantar.

“When there were fewer services to choose from, it was different,” Sangari tells The Current. “Now, with the explosion of all these different platforms, viewers are trying to control the cost a little bit, and reduce their overall streaming costs.”

The average U.S. consumer subscribes to 3.65 streaming services, according to the study, with 59 percent of Americans surveyed being reluctant to spend $30 or more a month. This dovetails with the rate at which people are cutting the cord. Over a million Americans dropped their cable package from the first to second quarter of this year, according to Kantar.

“There’s only so much you’re willing to spend or have to spend, especially given inflation,” Hannah Avery, Kantar’s director of video on demand adds. “We’re seeing that people aren’t really cutting back on streaming at all, but they are cutting back on cable, which indicates the price point is very important.”

Cable goes full circle
As more services bring more competition to the streaming space, fragmentation is increasing. Forty-four percent of people surveyed in the U.S. said they watch multiple streaming services each week, stacking the options they pay for. And although consumers are ditching traditional cable TV at a record pace, ad-supported streaming has recreated a system that is reminiscent of a cable package. The difference now is consumers have much more choice over the content they watch on demand, without being locked into a restrictive cable contract.

“This has gone full circle because viewers are trying to avoid cable and cable TV ads, but they’re still stacking high with the different services that are available,” Sangari says.

In the race for consumer’s eyeballs, stacking these services allows for a win-win for both sides — streaming services don’t lose subscribers, while viewers get to expand their content choices by subscribing to a variety of lower-cost or free streaming apps a la carte. According to the study, 30 percent of Americans with a household income of over $80,000 spend over six hours a week streaming content on ad-supported platforms.

“Consumers are showing their tolerance for advertising in streaming, which is a good sign,” says Garrett MacDonald, chief commercial officer for video data platform IRIS.TV. “It’s all about the content with this ad-supported growth, and with that comes increased responsibility to deliver more relevant ad experiences.”

All figures, unless otherwise stated, are from YouGov PLC. Total sample size is 4,059 adults. Fieldwork was undertaken between May 20 and May 24, 2022. The survey was carried out online. The figures have been weighted and are representative of all U.S. adults (aged 18 and up).