Analysis: Disney+, Netflix to Reach $1B with Ad-Supported Streaming

While it has been a bit gloomy for streaming services recently, especially following Netflix’s first quarterly subscriber decline in a decade, a recent study from research firm MoffetNathanson shows that Netflix and Disney+’s upcoming forays into ad-supported streaming will be quite beneficial. Analyst Michael Nathanson projects an increase in Netflix revenue by $1.2 billion and Disney+ may see an increase of up to $1.8 billion by the year 2025.

Nathanson examined the differences between the two streaming services, noting the larger worldwide opportunities for Netflix, while stating that Disney+ has an edge in the advertising sphere as its parent company already has that infrastructure in place. Alongside a lower starting revenue per user (RPU), the House of Mouse is more likely to make greater gains in the future.

The report also looks at expected price points for both services. Nathanson thinks that Netflix might set its ad-supported tier at $6 per month — $4 cheaper than its current Basic plan. By 2025, Nathanson sees the streamer drawing 15 million new subscribers in the United States and 75.6 million worldwide with its lower-cost, ad-based service. A report from The Information last month projected similar growth for Netflix.

According to the report, Disney+ should start its newest tier at $7.99 per month initially, but he sees the media giant raising the cost of ad-free subscriptions at the same time, something that The Streamable speculated about last month. Subscribers will see five 30-second ad spots each hour as opposed to Netflix’s proposed six per hour on its subscription plan. Currently, the streaming giant does not plan to air ads mid-content.

When looking at existing ad-supported streamers, Nathanson also projects profit increases in Hulu, HBO Max, discovery+, and Peacock as well. Ad-based revenue may be the deciding factor in maintaining a successful streaming presence in the years to come, especially for platforms that don’t rely on live news and sports to draw additional viewers to their services.

Nathanson concluded his report with a take on investment opportunities that ad-based streaming might offer. While profitable on paper, the analysis reinforced a neutral rating on each company’s stocks as there is still uncertainty as to how Disney+ and Netflix will proceed, including assessing their libraries to ensure that available content is suitable for different types of advertising partners. Even though ad-supported streaming options project immense profits, reality may curb dividends if services struggle with implementation.