Average Revenue Per User (ARPU) has become a critical metric for streaming services and investors to gauge the performance of platforms featuring filmed entertainment.
However, the ARPU landscape is becoming more complex with the advent of hybrid Subscription and Advertising VOD options from Netflix, Disney+, and Amazon Prime Video, which recently introduced cheaper, ad-supported tiers.
This article delves into the ARPU figures, comparing them across major streaming services and examining the broader implications for the streaming and Pay TV markets.
Streaming Revenue Overtakes PayTV
Total revenues from streaming film entertainment, including subscription and advertising, will surpass PayTV revenues in the third quarter of 2024. This milestone highlights a significant shift in the media consumption preferences.
In the second quarter, U.S. PayTV revenue held a slim lead over streaming, at $17.1 billion compared to streaming’s $17 billion. However, the tide is set to turn this quarter, with streaming projected to surge to $17.3 billion, outpacing PayTV’s $16.7 billion. This shift underscores the accelerating momentum of streaming services as they edge out traditional PayTV.
Despite streaming subscribers overtaking PayTV subscribers in 2016, streaming’s lower ARPU has delayed the revenue catch-up until now. By 2028, PayTV revenues will be half what they were at their peak in 2017.
PayTV isn’t out of the game yet. Disney and Charter’s recent deal, granting nearly 15 million Charter subscribers access to Disney+’s ad-supported tier, demonstrates how traditional and streaming platforms can collaborate. This partnership highlights the role of traditional distribution as service aggregators, offering longer-term contracts, reduced churn, and maintaining control over billing—benefiting both streamers and pay-TV providers.
Comparing ARPU Across Major Streaming Platforms
Examining the ARPU figures reveals interesting insights into the performance of different streaming platforms:
- Netflix: Netflix’s overall ARPU, or “average revenue per membership” (ARM), was $7.64 for the year ending December 31, 2023, down from $8.50 in 2022 and $9.56 in 2021. This decline reflects Netflix’s focus on subscriber growth over ARPU.
- Disney+: Disney+ reported an average monthly revenue per paid subscriber of $6.84 for its core service and $1.28 for Hotstar in Q4. The core ARPU increased by $0.14 sequentially and $1.07 year-over-year, driven primarily by price increases.
- Paramount+: In its latest earnings report, Paramount+ saw a 16% increase in global ARPU, showcasing the platform’s ability to generate higher revenues per user.
- Warner Bros. Discovery (WBD): WBD’s streaming ad revenue jumped by 51% year-over-year, resulting in a 7% increase in ARPU.
The below table shows the most recent ARPU figures for leading global streaming services.
ARPU of Selected Global Streaming Services (2024)
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Licensing Terms & Included Programs:
Pay-1 & SVOD Rate Cards for Motion Pictures and Series Exhibited Worldwide in Multiple Availability Windows
- Motion Pictures: Pay-1, First Run, Second Window Features, Recent Library Features (Tiers AAA,A,B,C), Library Features (Tiers AAA,A,B,C), Current and Premium Made-For-TV Films and Direct-To-Video Films, covering many license periods over the last decade
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- Because most-favored-nation rates operate in practice, the rates and terms apply to a diverse range of content and distributors worldwide in multiple availability windows.
The Role of Advertising in Boosting Streaming Revenues
One of the critical drivers of streaming revenue is the introduction of ad-supported tiers by major platforms. In the U.S., streaming advertising revenue is projected to exceed $9 billion this year.
These ad tiers have successfully attracted new subscribers in saturated markets and served as an additional revenue stream for streaming services. For instance, Amazon Prime Video's new advertising tier is expected to bolster its revenue significantly, given that it is the world's leading e-commerce platform.
Netflix and Disney+ are shaking things up by raising prices on their ad-free plans. Netflix is cracking down on account sharing, and Disney plans to follow suit next year. Both platforms are focusing on growing their ad-supported subscriber bases, a strategy that's already boosting their ARPU figures.
Despite the focus on ARPU, it is not the sole determinant of a platform's success—for instance, Netflix's strategy of prioritizing subscriber growth over immediate ARPU. By slowly building its ad business and phasing out the cheapest ad-free plan, Netflix is preparing for sustained growth. Meanwhile, competitors' aggressive pursuit of higher ARPU through ad-supported tiers and price increases might lead to higher churn rates, jeopardizing long-term stability.
FilmTake Away: Dynamic Strategies in the Streaming Market
The streaming market is characterized by dynamic strategies balancing subscriber growth and ARPU. Platforms like Netflix prioritize expanding their user base, while others leverage ad-supported tiers to enhance ARPU.
The shift from Pay TV to streaming is inevitable, with advertising playing a crucial role. As the industry evolves, streaming services must adeptly balance acquiring new subscribers, reducing churn, and maximizing revenue per user to secure long-term profitability.