Free and/or lower cost ad-supported TV streaming is trending heavier as inflation continues to pinch consumer wallets, according to a new study from streaming media analytics firm Hub Entertainment.

Hub’s Q4 2022 “TV Advertising: Fact vs. Fiction” study pointed to the emergence of new free and lower-cost viewing options from Netflix and Disney+ as helping advance the popularity of new ad-supported tiers this quarter.

Free Ad Supported TV (FAST) platforms are gaining users and stepping up their commitment to original programming, Hub said.

According some of the study’s key findings:

• Most TV consumers would rather watch ads if it means saving money.
• 57% say they’d rather watch ads and pay $4-$5 less per month for a streaming service. Preference for less expensive, ad-supported tiers over more expensive, ad-free tiers has remained relatively stable over the past year.

• Given the choice, more consumers would opt for a platform that offered them the option of both ad-free and ad-supported tiers.
• When asked to choose between three hypothetical TV services, viewers who are given the option to choose a platform with tiered service – some with ads, some without – do so nearly 2x as often as those shown a platform that only offers “limited ads.”

• Just as Netflix and Disney+ are releasing their new ad-supported tiers, some subscribers are planning to make the switch, and non-subscribers are considering signing up.
• 35% of current Disney+ subscribers and 24% of current Netflix subscribers anticipate switching their subscription tier when the new ad-supported options become available.

• In tandem with the release of their ad-supported tier, Disney+ is also raising the price of their ad-free offering: from $7.99 to $10.99 per month. This helps explain why more than 1 in 10 Disney+ subscribers think they’ll drop the service entirely.
• The ad-supported tiers are also drumming up interest among viewers who are not currently subscribers. 22% of Disney+ non-subscribers think they’ll sign up for Disney+ once the new ad-supported tier is available. A similar 22% of Netflix non-subscribers anticipate signing up for Netflix service, including 15% who anticipate signing up for the ad-supported tier.

• AVODs offer the most ‘reasonable’ ad-supported viewing experience and draw the most engagement with advertising.
• Subscribers to the ad-supported tiers of Discovery+ and HBO Max are the most likely to feel the number of ads they saw during a show they watched recently was “reasonable” – nearly 3x higher than for Live TV on an MVPD.

• Those two platforms are also at the top of the list when consumers are asked how much attention they paid to the ads they saw during the show. 37% of Discovery+ and HBO Max viewers say they gave the ads their nearly “complete” attention.

• A better ad experience makes for stronger ad engagement. Overall viewing enjoyment is closely linked with ad attention, and ads and ad-breaks that are shorter are more likely to keep viewers engaged.
• Viewers who enjoy their overall viewing experience (including the ad load, break length, and other considerations) report paying attention to most of the ads more often than those who enjoyed their overall experience less.

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• Asked about what would make them more likely to engage with advertising on TV, top answers include shorter ad breaks, shorter individual ads, and single-ad pods, along with with ads that reward viewers for their attention.

• Free, Ad-Supported TV streaming services (FASTs) continue to gain users, and made-for-FAST original content is getting noticed.
• In Q4 2022, 65% of consumers say they use at least one FAST such Pluto TV, the free version of Peacock, the Roku Channel, TubiTV, Freevee, etc. Usage continues to tick up over time, posting a 10-percentage-point gain over Q2 2021.

• FAST services’ investment in original programming is starting to gain traction. 34% of current FAST users and 19% of non-users say they have heard of original shows or movies that were produced specifically for a free service. The most recalled FAST original titles were Roku Channel’s Weird: The Al Yankovic Story and Freevee’s Leverage: Redemption.
• The increased availability of original content on FAST platforms may continue to fuel user growth in this sector. 47% of current FAST users and 30% of non-users say they’d be more likely to use a FAST service if they heard it was producing original, exclusive content.

“The industry seems to have finally solved the mystery of how to get consumers to accept ads in TV—and it was as simple as offering a less onerous ad experience and paired with a price break to boot,” stated Peter Fondulas, principal at Hub. “Now that Netflix and Disney+ have jumped on the ad-supported bandwagon, the question is whether and when the remaining ad-free only holdouts will join in.”

Source: Hub Entertainment Research

The “TV Advertising: Fact vs. Fiction” study conducted in November, queried 3,001 U.S. consumers between the ages of 14-74, who said they watch at least 1 hour of TV per week.

Since 2013, Hub Entertainment Research has measured and tracked how technology changes the ways consumers discover, choose and consume entertainment content. We work with the largest networks, pay TV operators, streaming providers, and studios.

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By Greg Tarr

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