KATE THOMPSON DAVY: The streaming TV conundrum in the age of subscription fatigue

Rupert Murdoch’s Fox Corporation announced on Tuesday that it would be extending its “free” (ad-supported) digital streaming platform Tubi to users in the UK. This will allow it to compete for a share of the UK’s streaming video on demand (SVOD) audience, which in quarter one 2024 was about 19.5-million households (Statista).

Tubi is already available (using the ad-supported model) in the US, Canada and Australia. According to Nielsen Gauge, it has 80-million active monthly users, who clock up viewing minutes in line with the users of Disney+. 

The whole gambit is predicated on the belief that users can and will stomach a bit of advertising in exchange for their SVOD options. It is in many ways a reversal of the narrative accompanying the streaming media “revolution” that dethroned (and summarily executed) Blockbuster, and handed the crown to Netflix, the world’s first streaming success story that came to define the category. 

This is a plot point long predicted. In 2022 already, Wired’s Angela Watercutter wrote: “The golden age of streaming is over ... streaming looks more like terrestrial TV than ever.” In May 2024 Netflix’s cheaper ad-supported tier boasted 40-million global subscribers. That’s almost double its January 2024 figure if you’re looking for growth trends. 

And Netflix is, let’s remember, the giant of streaming giants, with 270-million users — making the ad-supported tier about 15% of its subscriber base. It is very much the outlier in streaming, reporting growth in both profits and subscriber numbers that allows it to continue to create new shows. Even then, its ad-tier options and moves to incorporate live programming (such as a partnership with World Wrestling Entertainment) means the distinction between “old TV” and new is looking fuzzier than a weak broadcast signal.

So, is the dream of ad-free streaming dead? Perhaps not just yet, but the SVOD industry is in flux — and the warning stands for anyone who relies on subs and subs alone. Streaming isn’t going to disappear, but successive reports over the past 18 months show that the “stickiness” of the subscriptions model isn’t the buffer it used to be. While a Forbes Home survey in 2024 found 99% of US households subscribe to at least one streaming service, almost half (45%) have cancelled a streaming sub within the past 12 months because “costs were too high”.

Simon-Kucher research found that the number of subscriptions per consumer is declining worldwide, by 14% in the past year. A TechRadar survey found that half of US and UK respondents “decided to stop or cut back on” their entertainment subscriptions in 2023.

How did it unravel? When you start with a product that is subscription based you need volumes of paying users for the numbers to make sense. Now that Netflix isn’t the only game in town, the streaming giants are competing for a finite pool of subscribers. In response we’ve seen these companies tweaking their offerings in various ways — including the introduction of advertising supported tiers — and cracking down on password-sharing freeloaders. This is commercially entirely reasonable, but it hasn’t earned them goodwill from an increasingly cash-strapped consumer.

In the developing world the numbers are even tougher. SA with its small middle class is a hard nut to crack, despite the dire need for alternatives to our traditional broadcast options. Here our low fibre-internet penetration (and constrained population with disposable income, for that matter) means fewer than 5-million people (well under 10%) subscribe to SVOD services locally.

I confess that I struggled to find a definitive number and have made an approximation based on reported subscriber numbers from the dominant players. Still, these kinds of numbers mean it is hard to prioritise wooing local subscribers, especially if the price of said “woo-age” is making expensive local content. Amazon Prime has already walked back some of its promises of developing such projects and retrenched commissioning staff here and in Nigeria.

Even without local production costs weighing them down, a low subscriber base means a heavy support burden for relatively low returns. British content specialist Britbox is a month away from turning off its SA taps. A spokesperson told TV writer Thinus Ferreira that “Britbox is refocusing on its more established markets and the areas of the business that will have the highest opportunities for growth”. It will join Acorn TV on the heap of those that have failed to make it work in SA, including VIDI, Kwesé, Vodacom’s Video Play, Cell C’s Black, MTN’s FrontRow (later Vu), and more.

Showmax, on the other hand, is growing — with a 16% climb in subscribers year on year despite posting successive trading losses. MultiChoice has pinned enormous hopes on the platform, targeting R18bn ($1bn) or more in revenue over the next five years, a far cry from their 2023 figure of R1bn. 

The rise of ad-supported options in digital streaming might then prove a boon for those beleaguered broadcasters that are fighting the overwhelming power of global streaming competition. After all, our major broadcasters — including the SABC, eMedia, and to a lesser degree MultiChoice — rely on selling advertising to their captured audiences to pull in revenue. 

The battle continues. As subscribers get active about swapping subs, streaming platforms have returned the volley with increased tier fees, and every configuration of bundle deals (including discounts for upfront payments for mid- and longer-term agreements).

Tubi and Netflix expanding their ad-enabled service to new markets is just the latest play. I’d say we are mid-game for now, with the outcomes entirely uncertain. 

• Thompson Davy, a freelance journalist, is an impactAFRICA fellow and WanaData member.