With Netflix at $20, streaming’s cable TV tipping point getting closer

Broadcast companies are discovering that their most valuable customers may not be their highest-paying ones. Instead, it is increasingly the viewers who watch the most.

The change is being driven by a shift from a subscription-only model to one that combines subscription fees with advertising. Since ads are sold based on views, the more time a subscriber spends watching, the more revenue the viewer earns.

In March, netflix raised prices for the second time in just over a year, increasing its standard ad-free plan to about $20 a month and its ad-supported plan to $9; This signals that how much a subscriber watches may be as important, if not more important, than what they pay in advance.

“It’s a double payday,” said Kevin Krim, president and CEO of EDO, a company that measures the impact of advertising on broadcast and linear TV. “As long as ad-level subscribers engage with content and ads, they will be at least as valuable or more valuable than ad-free subscribers,” Krim said.

After resisting ads for years, Netflix is ​​now leaning heavily into this model and is rapidly expanding its advertising business as well as subscriptions. “We’re making good progress and there’s a huge opportunity ahead of us,” Netflix co-CEO Greg Peters said in a statement following the company’s latest earnings report. he said.

Disney’s Hulu has long combined subscription and advertising revenue, and extraordinary, Warner Bros. discovery And comcast They implemented similar strategies on streaming platforms.

But Netflix’s advantage comes from both its scale and how much its audience watches. According to the company statement Shareholder update for Q4 2025has over 325 million subscribers worldwide and viewers collectively watched over 100 95 billion hours of content It offers the opportunity to generate much more advertising revenue than competitors in the first half of 2025 alone.

According to Peters, closing the gap between ad-free and ad-level subscribers is the company’s main focus. “The gap is narrowing,” the company said in its latest statement, and closing it would be “a significant opportunity for future revenue growth.” earnings call.

Increasing value of an ad-supported subscriber

According to EDO’s analysis, an ad-supported subscriber paying about $8.99 per month could see total monthly revenue of about $12.89 after 10 hours of viewing, $16.79 after 20 hours, and about $20 after about 28.5 hours. After approximately 41 hours of viewing, this subscriber can generate approximately $25 in monthly revenue; This is notably more than the currently standard $19.99 ad-free Netflix subscription.

The model assumes a $43 CPM, or cost per thousand impressions, and about nine 30-second ads per hour, Krim said. “This fundamentally changes how streaming networks need to value this subscriber,” he said.

“Developing our advertising business remains a top monetization priority. Our advertising revenue is on track to reach $3 billion in 2026, a 2x increase from the previous year,” Netflix spokesman Adrian Zamora said.

“We are getting much closer to equality than people think,” said Paul Frampton-Calero, CEO of Goodway Group, a digital marketing agency specializing in programmatic media, retail media and connected commerce. Ad-supported subscribers are on track to generate 50% to 75% of premium user value in the near term, he said, and have the potential to reach or exceed parity over time.

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

New streaming subscription growth is fueled by ads

The model is also driven by consumers who are increasingly resistant to higher subscription costs.

Accordingly Deloitte’s March 2026 Digital Media Trends While the average household’s streaming spending remains steady at about $69 per month, 61% of consumers say they would cancel service if prices increased by $5, according to the report. At the same time, nearly 68% of subscribers now use ad-supported tiers, indicating a growing desire to swap ads for lower prices.

Ad-supported plans aren’t just a cheaper alternative. They are now the primary way for new users to enter streaming platforms, said Mary Gabrielyan, chief strategy officer at media and marketing technology company AI digital.

According to Antenna’s report, approximately 71% of new subscriber growth over the past two years came from ad-supported tiers. 2Q’25 Subscription Status Report. The company, which tracks subscription activity across major U.S. streaming platforms, found that about 65% of them were new to the platforms rather than dropped from premium plans.

Despite this momentum, premium subscribers still generate more revenue today.

“The goal is ultimately to remain complacent,” said Jessica Reif Ehrlich, senior media and entertainment analyst at BofA Securities. “Premium subscribers are still more valuable, but [ad-tier subscribers] “At some point subscription pricing is going to hit a wall, and that’s where the growth will come from advertising.”