With Netflix new ad-free standard plan at $20, streaming's tipping point into old TV is getting closer

Streaming companies are discovering that their most valuable customers may not be the ones paying the most. Instead, it’s increasingly the viewers who watch the most.

The change is being driven by a move away from a subscription-only model to one that combines subscription fees with advertising. Because ads are sold based on viewership, the more time a subscriber spends watching, the more revenue that viewer generates.

In March, Netflix raised prices for the second time in just over a year, pushing its standard ad-free plan to around $20 a month, versus an ad-supported tier at $9, signaling that how much a subscriber watches may matter as much if not more than what they pay upfront.

“It’s 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 ad-tier subscriber is engaged with the content and the ads, they will be at least as valuable or more than ad-free subscribers,” Krim said.

After years of resisting advertising, Netflix is now leaning heavily into that model, rapidly building out its advertising business alongside subscriptions.”We’re making good progress, and the opportunity ahead of us is massive,” Netflix co-CEO Greg Peters said after the company’s latest earnings report.

Disney’s Hulu has long combined subscription and advertising revenue, and Paramount, Warner Bros. Discovery and Comcast have pushed similar strategies across their streaming platforms.

Netflix’s advantage, however,comesfrom both its scale and how much its audience watches.According to the company’sQ4 2025 shareholder update, ithasover325 million subscribers globally, and viewers collectively watchedmore than95 billionhoursofcontentin the first half of 2025 alone,providingfarmore opportunitythan competitorsto generate advertising revenueover time.

According toPeters,closing the gap betweenad-free and ad-tier subscribers is a major focus for the company.The”gap is narrowing,” andclosingitwill bea”key opportunity for future revenue growth,”he saidon the company’s recent earnings call.

The increasing value of an ad-supportedsubscriber

Basedon EDO’s analysis, an ad-supported subscriber payingroughly $8.99a month can generateabout $12.89 in total monthly revenue after 10 hours of viewing, $16.79 after 20 hours, androughly $20after about 28.5 hours. At about41 hoursof viewing, that subscriber can generatenearly $25in monthly revenue, notably more than the now standard $19.99 ad-free Netflix subscription.

The model assumesa $43 CPM, orcostper thousand impressions, and aboutnine30-second ads per hour, said Krim. “It fundamentally changes how streaming networks should value that subscriber,” he said.

“Building out our ads businesscontinues to bea majormonetization priority. Our advertising revenueremainson track to reach$3 billionin 2026, up 2x year-over-year,” saidNetflix spokespersonAdrian Zamora.

“We’re getting much closer to parity than people think,” said Paul Frampton-Calero,CEO of Goodway Group, adigital marketing agency specializing in programmatic media, retail media, and connected commerce.Ad-supported subscribersare on track togenerate 50% to 75% of the value ofa premium userin the near term, with the potential to reach or exceed parity over time, he said.

That’sbecause streaming platforms can combinescalewith detailed dataon viewingbehavior, allowingadvertisersto value audiences based onactual engagement rather than broaddemographics, he said.

New streaming subscriber growth is ad-supported

Themodelis also being driven by consumers who are increasingly resistant to higher subscription costs.

According toDeloitte’s March 2026 Digital Media Trendsreport, average household spending on streaming hasremainedflat at about $69 per month, while 61% of consumers say they would cancel a service if prices increased by $5. At the same time, about 68% of subscribers now use ad-supported tiers, reflecting a growing willingness to trade ads for lower prices.

Ad-supported plans are not just a cheaperalternative. Now, they are the primary waynew usersenter streaming platforms, saidMary Gabrielyan, chief strategy officer at media and marketing technology companyAI digital.

Over the past two years, about71% of new subscribergrowthcamefrom ad-supported tiers,according toAntenna in itsQ2’25 State of Subscriptions Report. The company, whichtracks subscription activity across major U.S. streaming platforms,found that of these,roughly 65%are new to platforms rather than downgrading from premium plans.

Even with thatmomentum, premium subscribers stillgenerate more revenue today.

“The goal is ultimately to be indifferent,”said Jessica Reif Ehrlich,seniormediaand entertainment analyst at BofA Securities.”Premium subscribers are still more valuable, but[ad-tiersubscribers] are working their wayup,” she said. “At some point, subscription pricing will hit a wall, and that’s where growth comes fromadvertising.”