Streaming approaches cable TV tipping point as Netflix hits $20

Streaming companies are beginning to realize that their most valuable customers may not be their most paying customers. Rather, it is the viewers who will be the biggest viewers.

This change is being driven by a shift from a subscription-only model to one that combines subscription fees with advertising. Ads are sold based on viewership, so the more time subscribers spend watching, the more revenue they generate.

In March, Netflix has raised its prices for the second time in just over a year, raising its standard ad-free plan to about $20 a month. Ad-supported plans, on the other hand, cost $9 a month, suggesting how much a subscriber watches could be just as important, if not more important, than how much they pay upfront.

“This is a double payday,” said Kevin Krim, president and CEO of EDO, a company that measures the impact of advertising across streaming and linear TV. “As long as the subscribers in the ad tier are interested in the content and the ads, they’re worth at least as much or more than a subscriber without ads,” Krim said.

Netflix, which has resisted advertising for years, is now leaning heavily into that model, rapidly building an ad business alongside its subscriptions. “We’re on track and there are great opportunities ahead,” Netflix co-CEO Greg Peters said after the company’s latest earnings report.

Disney’s Hulu has long made money through a combination of subscription fees and advertising revenue. paramount, warner bros discovery and comcast has been pursuing a similar strategy across its streaming platforms.

But Netflix’s advantage comes from both its size and viewership. According to the company’s Q4 2025 shareholder update, the company has more than 325 million subscribers worldwide, with viewers totaling more than 95 billion hours of content watched in the first half of 2025 alone, with far more opportunities to generate long-term advertising revenue than its competitors.

Peters said bridging the gap between ad-free and ad-tier subscribers is a key focus for the company. “The gap is closing,” he said on the company’s recent earnings call, and that closing the gap represents “an important opportunity for future revenue growth.”

Increased value for ad-supported subscribers

According to EDO’s analysis, an ad-supported subscriber who pays approximately $8.99 per month could generate monthly gross revenue of approximately $12.89 after 10 hours of viewing, $16.79 after 20 hours, and approximately $20 after approximately 28.5 hours. For about 41 hours of viewing, its subscribers can earn nearly $25 per month, which is more than the currently standard ad-free $19.99 Netflix subscription.

Krim said the model assumes a CPM of $43, or cost per 1,000 impressions, and about nine 30-second ads per hour. “It fundamentally changes how streaming networks should value their subscribers,” he said.

“Strengthening our advertising business remains a key monetization priority. We expect our advertising revenue to double to $3 billion in 2026 compared to the previous year,” Netflix spokesperson Adrian Zamora said in a statement.

“It’s a lot closer to parity than people think,” said Paul Frampton Calero, CEO of Goodway Group, a digital marketing agency specializing in programmatic media, retail media, and connected commerce. He said ad-supported subscribers are on track to generate 50% to 75% of the value of premium users in the near future, and could equal or exceed that over time.

That’s because streaming platforms can combine scale with detailed data on viewing behavior, allowing advertisers to evaluate audiences based on actual engagement rather than broad demographics, he said.

New streaming subscriber growth is fueled by advertising

This model is also being driven by consumers who are increasingly resistant to rising subscription costs.

According to Deloitte’s March 2026 Digital Media Trends Report, average household spending on streaming remains flat at about $69 per month, but 61% of consumers say they would cancel their service if the price increased by $5. At the same time, approximately 68% of subscribers are currently taking advantage of ad-supported slots, reflecting a growing desire to trade advertising at lower prices.

Ad-supported plans are more than just a cheap alternative. These are now the primary means for new users to enter streaming platforms, said Mary Gabrielleen, chief strategy officer at media and marketing technology company AI Digital.

According to Antenna’s Q2 2025 Subscription Status report, approximately 71% of new subscriber growth over the past two years came from ad-supported tiers. The company tracks subscription activity across major U.S. streaming platforms and found that about 65% of them are new to the platform rather than downgrading from a premium plan.

Despite its momentum, premium subscribers still generate even more revenue.

“The ultimate goal is to become indifferent,” said Jessica Lief Ehrlich, senior media and entertainment analyst at BofA Securities. “Premium subscribers still have a high value, but[ad tier subscribers]are increasing their value,” she said. “At some point, subscription pricing hits a wall, and that’s where the growth comes from advertising.”