Beyond Binge Watching: Ads, Sports, and Telecoms Are Steering Streaming Back to Cable’s Playbook

With 96% of U.S. households already subscribed to at least one streaming service, the battle for new subscribers has reached a stalemate. Value for money now surpasses exclusive content as the primary driver for subscribers. The era when a single blockbuster title could bring in waves of users is fading, forcing platforms to prioritize retention over acquisition.

A recent approach by providers was adding multiple user profiles within a single account, a feature that saw paid subscriptions rise by 13% in the period after adding the feature. Engaging more household members ensures higher perceived value, even as subscription costs climb. Additionally, live sports have been pivotal in subscriber satisfaction, especially at Prime Video, which added to its Thursday Night Football offerings.

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The Age of Ad-Free Streaming Is Fading Fast

Ad-supported streaming is no longer just a complementary option in the world of video on demand—it’s becoming the driving force behind the industry’s evolution. As U.S. streaming reached 96% of households, equivalent to 125 million homes, growth has plateaued, forcing services to rethink their strategies. While premium, ad-free subscriptions declined by 2% in Q3 2024, advertising models like ad-supported video-on-demand (AVOD) and free ad-supported TV (FAST) grew significantly, with platforms like Netflix, Disney+, and Peacock leading the charge among premium providers. These shifts reflect changing consumer priorities, as affordability and perceived value outshine the appeal of uninterrupted viewing.

Europe is a significant player in this trend, driven by increasing internet and smart device proliferation and a reversion in consumer preferences toward free, ad-supported content.

Beyond the rise of ad-supported models, the saturation of the U.S. market underscores the changing dynamics of streaming. The average U.S. household now subscribes to 4.1 paid services, which has seen little growth even during last year’s traditionally robust fall series premieres.

Meanwhile, live sports and telecom partnerships are emerging as vital avenues for growth. Sports now drive 12% of new subscriptions, while telecom providers like Verizon and Charter Communications are redefining their role as aggregators of streaming services, bundling platforms like Paramount+ and Netflix into their broadband packages.

These developments reveal a maturing market where survival depends not on flashy new titles but on cross-offering partnerships, affordability, and diverse content strategies.

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The Lure of Ad-Supported Streaming Gains Momentum

As subscription video-on-demand (SVOD) services grapple with stagnation, ad-supported models emerge as the frontrunners in 2024. While overall video streaming penetration in the U.S. plateaued at 96% of households in the third quarter last year, the rise of AVOD and FAST propels growth in a saturated market. AVOD services from Netflix, Disney+, Paramount+, and Max grew by over 5% during this period, contrasting with a 2% decline in paid, ad-free SVOD subscriptions.

As consumer preferences shift from premium ad-free services to more affordable ad-supported options, 15% of SVOD subscribers downgraded to AVOD tiers between June and September 2024. This trend highlights that affordability is now a higher priority for many users than an uninterrupted viewing experience. Notably, Peacock and Discovery+ saw the highest rates of these migrations, demonstrating their success in aligning their offerings with customer needs.

While AVOD and FAST services are gaining traction, their ad strategies require fine-tuning. According to recent data, over half of streamers mute or ignore ads, and only 25% report purchasing products they’ve seen advertised. Furthermore, only 16% of streamers expressed satisfaction with ad relevance, emphasizing the need for platforms to refine their targeting algorithms and explore inventive ad formats to maintain user engagement. The inverse relationship between ad reach and effectiveness also poses dilemmas for marketers, who must choose between broader exposure and targeted impact.

Platforms with smaller subscriber bases, such as Showtime and Discovery+, tend to yield higher ad effectiveness, suggesting that niche targeting could offer competitive advantages. However, dissatisfaction with ad length, frequency, and relevance erodes the viewer experience, underscoring the need for innovation in ad delivery.

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Saturation and Stagnation in a Universal Market

With 125 million households streaming, the U.S. video-on-demand market has hit its zenith. Quarter-over-quarter growth is now a mere 0.2%, and even marquee titles failed to catalyze significant subscriber growth for their respective platforms. This retreat underscores a critical shift where compelling content alone no longer guarantees new subscriptions.

The advent of “stacking,” or the number of paid services per household, demonstrates signs of stabilization. U.S. households now average 4.1 paid services, a marginal increase of 0.7% in a historical period of growth fueled by fall series premieres. Stagnation signals a saturation point in consumer spending on streaming subscriptions.

Streaming services such as Peacock and Paramount+ bucked this trend, with 3% growth attributed to exclusive live events and water cooler shows. These successes highlight the need for strategic, event-driven content that complements subscription retention efforts.

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Live Sports: The Undisputed Leader of Subscriber Acquisition

As the allure of scripted series wanes, live sports are emerging as a linchpin for streaming growth. Sports-related streaming accounted for 10% of new SVOD subscriptions in Q3 2024, with ESPN+ and DAZN leading the charge. This growth aligns with broader viewing trends: 46% of streamers reported watching live sports over the last three months, but only 17% did so via streaming platforms, indicating substantial untapped potential.

Nevertheless, improving the sports streaming experience remains paramount. Bandwidth alone has proved a major stumbling block for the world’s most prominent streamer, evidenced by Netflix’s embarrassing Christmas picture quality issues as the day’s sole broadcaster of NFL games. Features such as on-screen statistics, co-watching options, and interactive elements are lacking, with fewer than 25% of users satisfied in these areas. Improving picture quality and enhancing interactive features will be critical as platforms vie for the loyalty of data-driven sports enthusiasts.

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The Role of Telecom Giants as Streaming Gatekeepers

Telecom companies are redefining their roles in the streaming ecosystem, emerging as aggregators of SVOD services. Partnerships like Paramount’s collaboration with Charter Communications and Verizon’s +play marketplace illustrate how broadband providers leverage their infrastructure to bundle streaming services.

For instance, Charter now includes Paramount+ in its Spectrum TV service, mirroring Comcast’s bundling of Netflix and Peacock through StreamSaver. Similarly, Verizon offers its wireless customers discounted bundles of ad-supported Netflix and Max, undercutting standalone subscription costs and enhancing its positioning as a streaming intermediary.

These partnerships benefit all parties: telecom companies gain subscriber stickiness, streamers access broader audiences, and consumers enjoy streamlined access to multiple platforms at reduced costs. Such strategies exemplify the growing convergence of the telecom and streaming industries as they collectively revert to a cable television business model.

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FilmTake Away: Brand Ecosystems Bolster Retention

Across the SVOD market, saturation has curtailed growth, and the traditional reliance on hit titles is proving insufficient for subscriber acquisition. Ad-supported models and live sports have emerged as primary growth drivers, while telecom partnerships reshape how consumers access streaming services.

The rise of brand ecosystems with platforms like Apple TV+ and Prime Video have integrated add-on channels, allowing users to seamlessly access services such as Paramount+ and Max without leaving their primary interface. These add-ons now account for 23% of all streaming services, a significant rise from 20% in late 2023. Apple TV+ has particularly benefited, with access to channel subscriptions increasing by 45% over the past six months.

U.S. platforms must adapt to maintain their current subscriber base. Retention strategies like multi-profile features, diverse content offerings, and integration into brand ecosystems are no longer optional but essential for survival. With live sports gaining traction and brand ecosystems proving their value, streaming services must focus on offering dynamic, personalized, and comprehensive experiences to remain relevant to increasingly fickle subscribers.

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