Netflix, Disney+, Amazon Prime Video and other major streaming services are counting on advertising to become a key and growing revenue source
The first television commercial aired on July 1, 1941, in New York City just before a Brooklyn Dodgers and Philadelphia Phillies baseball game on an NBC-owned (CMCSA) station. The minimalistic black-and-white ad promoting Bulova watches featured a simple branded illustration of a clock over a map of the United States. It was just under 10 seconds long and had a voiceover that said, “America runs on Bulova time.”
Since then, commercials have become the backbone of the business of television with advertisers shelling out billions of dollars every year to broadcast and cable networks to pipe ads directly into millions of homes across the country. In turn, this money is used to help fund everyone’s favorite shows, sports telecasts, and news broadcasts.
That’s the way it was for decades until Netflix $NFLX (NFLX) disrupted this model when it launched its streaming service in 2011. Netflix offered subscribers access to thousands of movies and TV shows on-demand and all ad-free for a relatively low monthly fee of $7.99. The streaming revolution, ushered in by Netflix, promised to finally kill ubiquitous television ads. But it turns out streaming wasn’t a nail in the coffin of the television commercial, it was just a slight detour.
Television ads are back and stronger than ever—and even Netflix, the company that once declared itself an advertising-free sanctuary, is now fully on board. After years of resistance, Netflix finally joined other major streaming services in embracing advertising as a key and growing source of revenue.
The company celebrated this November that its ad-supported tier has reached 70 million monthly viewers in just two years. And in October, Netflix co-CEO Gregory Peters told investors during a call that “while ads won’t be a primary driver of revenue in 2025" the company sees the opportunity to “close that gap.”
And it’s not just Netflix that has been touting the success of its advertising efforts. In its most recent quarter, Warner Bros. Discovery (WBD), the parent company of HBO, TBS, and CNN, reported that its advertising revenue coming from its direct-to-consumer segment, which includes Max, rose 49% year over year to $205 million. At the same time, ad revenue from its TV segment fell 13% to $1.5 billion.
In a twist of irony, streaming services that once promised to liberate viewers from commercials are now reinventing the very model they sought to destroy. As these platforms merge the precision of digital targeting with the broad reach of traditional television, they’re not just modernizing advertising—they’re writing the next chapter in a story that began with that simple Bulova watch commercial in 1941.
Many factors have led to the industry’s warm embrace of advertising. But ultimately, for most streamers, advertising was an untapped source of both revenue and subscribers.
Streaming services typically offer subscriptions to their ad-supported tiers at a discount, compared to their ad-free plans. These low-price, ad-supported subscription plans have opened the door for more budget-conscious customers.
As more streaming services flood the market, consumers are juggling multiple subscriptions to access their favorite shows scattered across platforms. This often leads to cancellations of less-used services. Ad-supported plans are supposed not only to help retain subscribers but also boost revenue through ad sales.
“Having price points that meet the needs of various segments of our society, various demographics is really important,” said Wedbush Securities analyst Alicia Reese. “Everyone wants good content, but not everyone is willing to pay that premium price for no ads.”
Netflix’s advertising initiative also comes at a time when the streamer and the industry as a whole is reaching saturation in some of the major regions it operates. As of Sept 30., Netflix has nearly 85 million paid memberships in the U.S. and Canada — that’s over 20% of the two North American countries combined.
When you consider most household members share one Netflix account, the pool of potential new users in North America is limited. Looking at the broader industry, about 95% of U.S. households are subscribed to at least one streaming service, according to the market research firm Kantar.
With this new reality, Netflix, along with other streaming services, has announced it no longer plans to regularly report subscriber numbers. Instead, these companies are trying to focus shareholders’ attention on other metrics.
Another reason media companies have turned to advertising is their familiarity with the model.
“Remember who is running these places. These are people who are struggling to figure out good TV models. And so, people do what they’re used to. People do what has worked in the past,” said University of Virginia business professor Anthony Palomba.
However, streamers are still trying to figure out how to best integrate ads into their services. There is still no industry standard for when or how often ads appear on streaming platforms, compared with linear TV, according to Dan Rayburn, a streaming expert and analyst.
“Some of the streaming services do fewer ad breaks, but longer ads, and some do more ad breaks, but shorter ads. Which one is better? There’s no right or wrong,” Rayburn said. “So, you still see what I would call some experimenting.”
The company’s vision for the next decade is to blend digital advertising’s sophisticated targeting capabilities with traditional TV’s broad reach, according to Netflix co-CEO Peters in a call with investors in November. Through required login systems and individual user profiles, streaming platforms can track viewing histories and preferences in ways traditional TV never could, creating unprecedented opportunities for advertising that’s both more personal and more effective.
Rayburn is a little more skeptical about how well streaming ads are performing. According to Rayburn, aside from a handful of successful campaigns, the industry has largely avoided sharing concrete data on how well streaming ads perform or whether they truly perform better than traditional TV advertising.
In the end, though, what matters most isn’t the metrics — it’s whether viewers will accept the new reality. And so far, users — who were already primed from the pre-streaming era to expect ads with their content — have not turned away from streaming because of ads, signaling that users are adjusting to this new norm, with all the major streamers having said that ads have not affected user subscriptions.
“Consumers can complain all they want on Twitter $TWTR, but they’re not actually doing anything,” Rayburn said.
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