Ad-free streaming is now a luxury

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Streaming was the bane of cable. Not only could you watch whatever you wanted at any time, but you didn’t have to sit through five minutes of commercial breaks. And the best part was the price: Netflix, for example, charged $7.99 a month when it launched its standalone streaming service in 2010. Amazon’s Prime Video was similar, offering ad-free streaming as a perk with its prime membership. Hulu was an outsider at the time, but that’s because it allowed you to stream ad-supported TV shows and movies. for free. It later added a $7.99/month Hulu Plus subscription, with limited advertising.

But the commercial-free streaming model was so attractive that when companies launched competing streaming services, most made them ad-free by default. Disney Plus cost $6.99/month when it launched in 2019, followed by an Apple TV subscription of $4.99/month, and the launch of the HBO Max streaming service for $14.99/month. (There were exceptions, of course, like Paramount Plus, which launched with ads for $4.99/month, and NBCUniversal’s Peacock, which offered some titles for free alongside the $4.99/month ad-supported tier with access to all shows and movies.)

As the broadcast industry grew and viewers settled into the services of their choice, many executives quickly realized that they could not make money by adding new subscribers to an already saturated market. In addition, Netflix will lose subscribers for the first time in more than a decade by 2022, while streaming businesses run by its competitors remain unprofitable. Broadcasters needed a solution – especially so they could continue to spend the billions needed to fill their libraries with movies and TV shows.

Amid steady waves of price increases, major streaming services have embraced advertising one by one in an effort to boost profits. HBO Max began rolling out a cheaper, ad-supported tier in 2021. Even Netflix, whose former CEO Reed Hastings said the service would never have ads, went back on its promise to launch its ad-supported program in 2022. Disney Plus followed suit, and Amazon Prime Video put its subscribers in more advertising space to get paid for free.

Now that almost all of the most popular broadcasters have ads, the price gap between the ad-supported and ad-free segments has widened. Streaming services often target ad-free categories with the biggest price increases, and Netflix recently raised the price of its regular and premium shows by $2, compared to $1 for its ad-supported category. Now, the price to go ad-free on Netflix is ​​$19.99 / month (or $26.99 if you want 4K HDR) — more than double the original subscription of $7.99 / month.

HBO Max similarly offered $2 rides to ad-free subscribers last year. It now costs $18.49 / month for its regular plan or $22.99 / month for premium, a huge jump from your original subscription of $14.99 / month. Prime Video doubled the price to go ad-free earlier this year and locked in 4K streaming after a hefty, $4.99/month subscription included in your $14.99/month Prime membership. And Disney Plus, which once offered an ad-free subscription for $6.99/month, now costs $18.99/month ad-free.

There’s a trick to this: Executives across the broadcast industry have reported that they’re getting more average revenue per user (ARPU) in ad-supported segments, as they get cash from viewership subscriptions and the ads they sell to them. In January, Netflix said its advertising business would earn $1.5 billion by 2025, a fraction of the company’s $45.2 billion in revenue. But Netflix’s ad volume is growing — it now reaches more than 250 million viewers each month — and the company expects advertising revenue to double to $3 billion this year.

More people are signing up for these ad-supported categories as ad-free programs are becoming more expensive. Among streaming services that offer low-cost, ad-supported plans, nearly half of their current subscribers in the US subscribe to the ad-supported segment, according to research by analytics firm Antenna.

Apple TV remains the only major streaming service that doesn’t offer an ad-supported subscription — though questions remain about how long it will last. Apple currently shows ads during live broadcasts such as Major League Soccer games. While some have speculated that Apple is bringing ads to all of its services, the company has dismissed the rumors, with head of services Eddy Cue saying, “I don’t want to deny it forever,” but “there are no plans.” Apple TV has gradually raised prices alongside other broadcasters and now costs $12.99/month.

Meanwhile, Netflix is ​​finding more ways to show ads to viewers, such as allowing brands to use AI to “mix” their ads with one of Netflix’s shows or movies. Other broadcasters are experimenting with different types of ads as well, Peacock showing them in the profile selection menu and others invading the default screens. Unfortunately, viewers on a budget really have no choice but to deal with ads – many of which are repetitive or appear at the wrong times.

That’s why some viewers are turning to alternatives, such as ad-laden but free-to-view YouTube, which remains Netflix’s biggest competitor, and ad-supported free-to-air TV (FAST) services like Tubi, Pluto, and The Roku Channel. Other services try to match accessibility with ad-free streaming, Roku-owned Howdy offers over 10,000 hours of ad-free TV shows and movies for $2.99 ​​/ month.

While some of these options may work as a stopgap at higher prices, they just don’t have the premium streaming titles they’re known for. It’s more expensive than ever to access shows and movies without interruptions, taking away what drew many people to streaming in the first place.