The trend was quickly mirrored by competitors. In February 2024, Amazon Prime Video made a controversial move by introducing advertisements into its standard service by default. Unlike Netflix, which created a new tier, Amazon opted to change the experience for its entire existing user base, requiring an additional £2.99 monthly fee to return to the ad-free experience they were already paying for. Disney+ followed a similar path, introducing its own ad-supported tier that same November.
There is a discernible and calculated pattern to these developments. Advertisements are initially introduced as a low-cost alternative, presented as a way to provide flexibility. Once the market adjusts to the presence of ads, the pricing gap between the ad-supported and ad-free tiers is widened. Eventually, the ad-free experience is repositioned not as the standard, but as a luxury "Premium" product. Even the "cheap" options are subject to rapid inflation; Netflix’s ad-supported tier has already seen its price rise by a third, climbing from £5.99 to £7.99 in a relatively short window.
The motivation behind these changes is not a personal vendetta by streaming executives against their audience; rather, it is the cold reality of corporate mathematics. For the better part of a decade, the streaming wars were fought on the battlefield of subscriber growth. Investors and Wall Street analysts were willing to tolerate massive annual losses—amounting to billions of dollars in some cases—as long as the total number of "eyeballs" continued to increase. The goal was to capture market share at any cost, often subsidizing the true price of content production to keep subscription fees artificially low.
This era of "growth at all costs" came to an abrupt halt in 2022. That year, Netflix reported its first decline in subscriber numbers in over a decade. The shockwaves were felt throughout the industry, and the financial markets shifted their demands almost instantly. Investors no longer wanted to see just more users; they wanted to see more profit.
The problem facing these companies is that the market has reached a point of saturation. Most people who want a streaming service in the UK or the US already have one. With the pool of new subscribers shrinking, companies must find ways to extract more revenue from their existing customer base. This is achieved through two primary levers: raising the monthly subscription price or selling advertising space. An ad-supported tier allows a streamer to pull both levers simultaneously, generating a steady subscription fee from the user while also collecting a "per-view" fee from advertisers. In many cases, the "Average Revenue Per User" (ARPU) is actually higher on an ad-supported plan than it is on a standard ad-free plan.
The Re-invention of the Cable Package
The irony of the current situation is that in our effort to escape the traditional cable and satellite television models, we have inadvertently rebuilt them on the internet. A decade ago, the promise was "unbundling"—the ability to pay only for what you wanted. Today, the reality is a fragmented landscape of multiple monthly subscriptions that, when added together, often exceed the cost of the old Sky or Virgin Media packages we once disparaged.
