MW The boom of ad-supported streaming is starting to look a bit like old-school television

By Lukas I. Alpert

Most of the growth in streaming is being driven by cheaper ad-supported packages, as consumers seem to be fine with watching commercials again

After a few years when viewers could mostly avoid commercials through streaming subscriptions, television advertising has come roaring back - and consumers don't seem to mind.

During the peak of the streaming wars, it felt like ads on TV might be going away. Companies like Netflix Inc. had bet that subscription fees alone would be enough to sustain them, and viewers seemed keen to leave commercial breaks behind.

Fast-forward to the current day, and almost every streaming service offers a lower-cost, ad-supported package that has proven key to driving growth. It seems consumers don't mind watching a few ads during their favorite shows after all.

"Service by service, [advertising-based video on demand] continues to dominate engagement growth," Robert Fishman, a media analyst for MoffettNathanson Research, wrote in a note to clients.

Fishman said that measured by engagement - or the number of hours streamed - services like Roku Inc.'s (ROKU) Roku Channel, Fox Corp.'s $(FOXA)$ Tubi and Paramount Skydance Corp.'s (PSKY) Pluto, which offer programming stuffed with ads for free, are leading the way.

Those three platforms have seen an estimated 30% growth in the third quarter in hours watched compared with the same point last year, the research note said.

By that metric, Alphabet Inc.'s $(GOOGL)$ YouTube - including both its free ad-driven service and its YouTubeTV subscription service - has seen 17% growth.

Top subscription streaming services, like Netflix $(NFLX)$, Walt Disney Co.'s $(DIS)$ Disney+ and Amazon.com Inc.'s (AMZN) Prime Video, saw 1% growth over the same time frame. Others - like Paramount+, Comcast Corp.'s $(CMCSA)$ Peacock, Warner Bros. Discovery Inc.'s (WBD) HBO Max and Apple Inc.'s $(AAPL)$ Apple+ - have seen hours watched drop by 13%.

MoffettNathanson said that Netflix, which belatedly added an ad-supported tier in late 2022, seems to have "cracked the code" on pricing in a way its competitors have struggled to match.

For its ad-supported package, Netflix charges the least of any major streaming service, at $7.99, while its top-tier premium bundle is the most expensive of any service, at $24.99.

"This pricing structure allows Netflix to capture the highest-value, least price-sensitive customers, yielding higher [revenue per user]," Fishman wrote. "The combination of the lowest entry point and the priciest top tier - a 213% spread between the two - helps explain why Netflix has grown its base without materially sacrificing RPU or churning during price increases."

Netflix stopped publicly reporting its subscriber numbers earlier this year, but it reported significant jumps in revenue and net profit in the second quarter. The company's stock hit an all-time high over the summer but has fallen about 10% since then.

Netflix has been bullish about the prospects for its ad business, even if it remains a small part of the company's revenue pie for now.

The engagement data reflect a trend that has been ongoing, as many streaming services have seen turns to profitability with the move to add cheaper, advertising-supported tiers. But that has also led to declines in some revenue, which the ad revenue has yet to fully offset, triggering efforts by some companies to cut production costs - meaning consumers are getting less.

Analysts have said that is a recipe for a slowdown in subscriber growth, which may partly explain the move to free and ad-supported bundles.

-Lukas I. Alpert

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September 30, 2025 14:34 ET (18:34 GMT)

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