How Free, Ad-Supported Streaming Is Bridging the Gap Between Linear and SVOD | Analysis

When traditional media companies decided to get into the streaming game, they were looking to solve a key problem for consumers: How to offer flexibility that the pay TV bundle didn’t. But they soon realized that the road to profitability wouldn’t be easy — and one of the key levers the studios keep pulling to reach that milestone has been to increase prices.

“In the aughts and early 2010s, it was always a la carte — I’ve got 7,000 channels and nothing to watch. And then consumers got what they wanted and streaming is rife with a lot of the same issues,” Adriana Waterson, executive vice president of insights and strategy lead at Horowitz Research, told TheWrap. “People in some cases are paying more than they were paying for cable with all the streaming services they have and still can’t find anything to watch.”

Enter FAST, or free, ad-supported streaming television, one option that’s helping the industry to bridge the gap between the lean-back experience of traditional linear and the fragmented streaming space. FAST primarily consists of live linear channels offered for free via a continuous feed, while the Advertising Video on Demand (AVOD) category is focused on on-demand content.

FAST is helping to alleviate a key consumer frustration by making it easier and cheaper to find something to watch. For traditional media players and creators, it also opens a new avenue to monetize content and reach new audiences. And for TV manufacturers like Samsung and LG, it’s an opportunity to break into the licensed content game and sell ad inventory.

“The barrier to entry is effectively zero, so it gives you an opportunity to test audiences and see what they like. You can experiment, whether it’s seeing if an older IP still has legs to it or trying to see what new IP audiences will want to watch,” Tejas Shah, an independent consultant and former FilmRise analytics and strategy head, told TheWrap. “The value proposition of FAST to the audience is that you have effectively an infinite amount of content available to you. And if you want something specific, you can search for it and get it.”

FAST services Tubi, The Roku Channel and Pluto have each individually taken a share in Nielsen’s monthly Gauge report, with Tubi and Roku even surpassing major streaming players like Max and Paramount+. But executives and industry experts tell TheWrap that FAST is proving to be more complementary than cannibalistic, with its users also subscribing to SVODs and pay TV.

While many of the established FAST platforms launched in the mid-2010s, the industry’s growth has primarily exploded since 2019, fueled by the COVID-19 pandemic, cord-cutters looking to ditch the linear TV business and cord-nevers looking to escape streaming price increases.

Ampere Analysis estimates that as of the second quarter of 2024, there were 3,500 available FAST channels in the U.S. across LG Channels, Plex, Freevee, Roku, Pluto TV, Samsung TV+, Xumo, Tubi, Vix and Peacock. About one-third of the U.S. population (115.5 million people) will watch FAST channels at least once a month in 2024, eMarketer forecasted in February, up 13.5% from 98.2 million FAST viewers in 2022. The channels feature a lot of older television shows, including the Carol Burnett Show.

The technical distribution costs for a FAST channel can range anywhere from $1,500 to $5,000 per month, Ampere Analysis analyst Guy Bisson told TheWrap, compared to the “hundreds of thousands” of dollars of investment required to operate a linear channel every year. He estimated the technical distribution cost for satellite TV could be close to $100,000 per year, while terrestrial would be even more.

“Assuming you’ve got some content — and a lot of the people who run these channels own that content — then your economics start to become very attractive, assuming you can sell the advertising,” Bisson said. “You can run a channel very cheaply, and thus make a viable business of it in a way that you simply could not have done before streaming came along.”

The FAST landscape

In the early days, FAST was “spaghetti on the wall,” Waterson said. “Everybody was just throwing things together and thinking things were going to stick. There was no real strategy as far as programming, windowing, or anything like that.”

But the initial experimentation phase for FAST in the U.S. is over —- and the bar for content and distribution is getting higher.

“We’re evaluating new pitches every week,” Xumo content programming and partnerships vice president Stefan van Engen told TheWrap. “Whereas in the early days, it was just trying to figure out people that had rights to do this, it’s now to the point where we run a very extensive evaluation of the content and channels. We don’t want to just open up the floodgates and then bury the share and voice of great channels.”

Shah estimates that there are currently 1,947 unique FAST channels in the U.S., 342 of which are focused on a single IP.

About half of available FAST channels in the U.S. during the second quarter were focused on news (49.4%), according to Ampere. The remainder of FAST channel programming was made up of reality (8.3%), TV series (7.4%), movies (6.2%), general entertainment (5.4%), sports (5.1%), documentary (4.4%), music (4.2%), children (3.1%), lifestyle (2.2%), Latino (2.2%), food (1.5%) and other (0.4%).

Tubi chief content officer Adam Lewinson told TheWrap that the service’s over 250 FAST channels in the U.S. are primarily focused on categories like news, sports and premium library and proprietary content, such as “The Masked Singer.” Engen said over half of Xumo’s viewing hours are coming from news, movies and crime TV.

Between the first and second quarters, LG added the most FAST channels in the U.S. at 254, primarily driven by Local Now news channels, while Amazon’s Freevee removed the most FAST channels at 49. When looking by genre, news was the most added category with 232 channels, while music was the most removed FAST channel genre during the period with nine channels removed and just one added.

FAST vs linear and SVOD

FAST platforms Tubi and The Roku Channel have notably held their own when it comes to viewership, with their usage shares in Nielsen’s Gauge for the month of August standing at 1.8% and 1.7% respectively, compared to Max’s 1.3%, Paramount+’s 1.1% and Pluto’s 0.7%. When combined with Pluto TV, the three platforms accounted for a total of 4.2% of the streaming category’s 41% share of TV usage for the month.

A Xumo study of 4,000 FAST users released in June found that nearly half (47%) of consumers that subscribe to pay TV also regularly watch FAST, compared to 46% of cord-cutters and 35% of cord-nevers. And Hub Entertainment Research found that over seven in 10 FAST users subscribe to three or more SVODs, but they’re also the most likely to swap out subscriptions when they run out of content to watch.

In a study conducted by Horowitz Research between March and April of over 2,000 TV viewers aged 18 and up, more than half (53%) of FAST users surveyed said they cut back on the amount of paid streaming services that they have, while 38% said they planned to cancel a cable or satellite TV service based on their usage of FAST.

In comparison, 43% of those surveyed said they decided to subscribe to a pay TV service after watching a show on FAST and 77% viewed FAST as an addition to their live TV viewing experience rather than a replacement for cable and satellite TV or a subscription with live TV service.

The Future of FAST

According to eMarketer, The Roku Channel will lead the way in 2024 with 83.4 million viewers, followed by Tubi (74.6 million), Pluto TV (61.7 million), Freevee (51.7 million), Crackle (36.8 million) and Samsung TV+ (23 million). By 2028, 36% of the U.S. population, or 125.4 million viewers, is expected to be watching FAST channels at least once a month, the firm forecasts.

Waterson expects FAST will continue to grow as traditional media giants get more involved in the space. Major SVODs like Netflix and Disney+ could decide to launch dedicated FAST channel sections within their platforms in the future to help upsell consumers to their paid tiers, she said. (Peacock notably offered a free, ad-supported tier as an option when it first launched, but later eliminated it.)

But only those FAST channels that resonate best with advertisers and consumers —- and can afford to continue operating —- will thrive and survive.

“The FAST environment is not infinite, as much as people would like to think they can just throw up a channel and make it work,” Waterson said. “There is going to be natural selection there. There is going to be pruning.”

While there is a place for linear FAST going forward, the vast majority of consumption likely will come from on-demand content in the years ahead. More than 90% of Tubi’s audience already watches it that way, Lewinson said. About 63% of Tubi’s audience is made up of cord-cutters and cord-nevers, and 40% is “unreachable” on other ad-supported SVODs.

“Part of the reason to have these FAST channels for library content is it can be a solution for the paradox of choice,” he added. “But I don’t think you solve the paradox of choice by creating a new paradox of choice with 1,000 FAST channels to choose from.”

To help bolster its growth, Tubi has started dipping its toe in original content with some 300 projects to date. Around 25% of Tubi viewers watched its originals last quarter.

“The streamers who remove barriers, find unique stories and really just create a joyful experience in watching television will be the platforms that win,“ Lewinson said.

Bisson sees AVOD as the primary growth driver for streaming over the next five years, but he believes there’s still a long way to go to close the “significant” advertising gap with linear, noting that the major studios have only just started to make the transition into the ad-supported television market.

Ampere forecasts that Hulu will bring in $2.5 billion of ad revenue in 2024, followed by Peacock with $2.08 billion, Tubi with $1.59 billion, Prime Video with $1.3 billion, Roku with $1.18 billion, Paramount+ with $1.06 billion, Pluto TV with $801,343, Netflix with around $793,124, Freevee and Discovery+ with around $480,000 each, Disney+ with $321,419 and Max with $273,829.

Ultimately, Bisson believes the term FAST could cease to exist within the next five years.

“It’s a transitory term to make distinctions between forms of delivery. While we’re at this stage of the beginning of the free-to-air transition to streaming, in the future we’ll think of it as free TV or thematic TV, or one of the old terms that we always use, because that’s what it is,” he said. “Some will be paid and some will be free and ad-supported.”

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