Ad-supported streaming services need to ramp up originals to attract younger, more affluent audiences, new research from Ampere Analysis suggests.

LONDON—New research from Ampere Analysis shows that advertising supported streaming services continue to be the fastest growing streaming category, with a quarter of US Internet users now relying on a mix of Advertising-funded Video on Demand (AVOD) and Subscription Video on Demand (SVOD) services for their entertainment. 

That is up from 15% in Q1 2020. 

But Ampere also found that AVOD viewers tend to be older and less affluent than their SVOD counterparts and tend not to stack multiple SVOD services, preferring traditional pay TV packages. 

In the study, older users (age 55-64 years old) were the fastest growing age bracket of AVOD viewers, with a 7-percentage point increase in AVOD uptake among the group in the last year alone. 

This was also the fastest growing age bracket for SVOD but due to the greater maturity of the SVOD market, saw just a 3.5 percentage point growth in the last year.

Commenting on those trends, Tom Bell, analyst at Ampere noted that “we can see the appeal with older audiences at present, but AVOD services will need to compete more directly with the content on SVOD if they want to attract the younger, more affluent audience already familiar with SVOD.”

The Ampere’s analysis of catalog data also showed that content exclusivity is key difference in strategy between AVOD and SVOD platforms, with SVOD services relying more heavily on original content and AVOD services focusing on the building up large libraries of content as a way to bolster consumer perceptions.

Their data shows that US AVOD catalogs are large – but are primarily made up of older, non-exclusive titles. While SVOD services typically rely on their vast catalog of exclusive titles to increase the quality and popularity of their content offering, this is not the case for AVOD services. The quality and popularity of AVOD catalogs is driven mainly by non-exclusive content, with their large catalogs made up of a much higher proportion of titles from studios which are also licensed to other services. 

“As studios are reserving an increasing proportion of their content for their own platforms, AVOD platforms are beginning to follow suit and commission their own originals,” Bell said. “While content exclusivity remains a key difference in strategy between AVOD and SVOD platforms, these early moves into original commissioning bring AVOD players a step closer to increasing their catalog exclusivity and quality and differentiating themselves in a crowded market.”

In its analysis of content libraries, Ampere found that all major SVOD services in the US offer some content that is available on AVOD for free.

Amazon, Hulu and Peacock have a significant amount of content that is also available via AVOD services. In total, 12% of titles on SVOD are also available on a free AVOD platform in the US. However, a small number of platforms account for the majority of the overlap between SVOD and AVOD. Amazon Prime Video has the greatest overlap with Fox-owned AVOD service Tubi, with 6,600 titles shared between the two services; over 90% of these are lower-value movie content. This is followed by NBCU-backed Peacock, with 715 titles available free on Tubi, with the majority of these also available via Peacock’s free AVOD tier.

Looking ahead, the AVOD players are starting to move into original programming to differentiate their catalogs and reduce reliance on licensed content, Ampere reported. Roku, Vudu, Crackle and IMDb TV have all begun to commission original programming, focusing primarily on Documentary and Comedy titles. Rival service Tubi has also committed to original productions, targeting 140 hours of new original content in late 2021.