Free ad-supported streaming services from Roku, Pluto TV, Xumo, and others attract viewers and appeal to TV manufacturers, which receive recurring ad revenue
Subscription services might dominate the over-the-top video market today, but free, ad-supported platforms are beginning to find … Tweets: @digiday See also Mediagazer Tweets: @digiday : These services are appealing TV manufacturers because they receive recurring revenue in the form of an ad-revenue share http://digiday.com/... See also Mediagazer
Context & Ripple Effects
In early 2018 the over-the-top market was defined by subscription fatigue: viewers were already paying for streaming content they didn't watch as exclusive-content services kept launching. Against that backdrop, Roku, Pluto TV, and Xumo were building a different model — free channels funded entirely by advertising.
The pitch that made this story matter was structural rather than consumer-facing: TV manufacturers could preinstall these services and collect a recurring ad-revenue share instead of a one-time hardware margin. The years since validated it — Roku later raised its cut of ad-supported channel revenue from 40% to 45% while mandating its own ad-insertion stack (its 2022 revenue-share increase), and by Q1 2024 a majority of new streaming subscribers were choosing ad-supported tiers anyway (Antenna's 56% figure).
First-order effects
- TV manufacturers shipping Roku, Pluto TV, or Xumo out of the box convert idle screen real estate into recurring ad-revenue share, decoupling their post-sale income from hardware pricing.
- Viewers get a no-cost tier alongside paid subscriptions, letting Roku, Pluto TV, and Xumo aggregate audiences who won't add another monthly charge.
Second-order effects
- Platform owners gain leverage over the channels they host — Roku's move to a 45% share and forced use of its ad-insertion technology and CDN shows the free-TV model concentrates power with whoever controls distribution.
- Advertisers follow the audience: eMarketer projected US streaming TV ad spend climbing from $8.11B in 2020 to $11.36B in 2021 across services like Hulu, Pluto TV, and Peacock, pulling budgets from linear TV.
Third-order effects
- If the pattern holds, ad-supported viewing stops being a niche complement and becomes the default economic engine of streaming — evidenced by YouTube testing its own hub of free ad-supported channels against Roku, Pluto TV, and Tubi, and by most new subscribers now picking cheaper ad tiers.
- Streaming industry structure consolidates around distribution platforms that tax both subscriptions and advertising on their devices, mirroring how app stores intermediate mobile software.
The trend: Streaming economics are shifting from subscription fees to advertising as the primary revenue engine, with device and platform owners capturing a growing share of both streams.