Speculation regarding how much the forthcoming ad-supported tier will fatten Netflix’s bottom line has been difficult to avoid in the streaming industry. One report from earlier this summer suggested that by 2027, Netflix will have generated an extra $5.5 billion thanks to the ad-supported video-on-demand (AVOD) subscription option.

But new analysis done by the independent research firm MoffetNathanson suggests that those high revenue projections may be a bit over-inflated. MoffetNathanson’s projection that Netflix will reach a total valuation of $38.2 billion by 2025 is 8% lower than the market consensus on revenue forecasts for the future of the company.

The company does believe that Netflix is still in line to hit $1.7 billion in new ad revenue in the U.S. alone by 2025, but thinks other firms are overestimating the number of new subscribers Netflix will attract to the ad-supported tier. MoffetNathanson believes that some of that increased ad revenue will be offset by the fact that many ad-tier subscribers will be customers that migrated from a more expensive Netflix plan, not brand new Netflix customers.

This projection aligns with a study done earlier this year, which suggested that many Netflix users are already watching ad-supported streaming on other platforms, and will thus be more willing to accept ads. Netflix already has 220 million global subscribers, which means the pool to pull new customers from simply isn’t that large.

There are few stories in the streaming industry that are causing as many waves as the upcoming debut of Netflix’s AVOD tier. Speculation has run rampant on every facet of the planned launch, from the price of a subscription to the price that Netflix is asking companies to pay per ad. Until the company actually rolls out the new tier (which could be as soon as next month), don’t expect the conjecture to die down.

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Netflix is a leading subscription-based video streaming service that offers on-demand access to an extensive library of over 3,000 movies, 2,000+ TV shows, and a growing collection of acclaimed Netflix originals. Renowned for producing groundbreaking content, Netflix has become a cultural powerhouse with hit originals like “Stranger Things,” “Wednesday,” “Squid Game,” “The Crown,” “Tiger King,” “Bridgerton,” “The Witcher,” and “Black Mirror.”

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The platform constantly updates its catalog, introducing fresh content alongside timeless classics and international hits. Netflix’s commitment to storytelling has also earned critical acclaim, with award-winning exclusives such as “Roma,” “Marriage Story,” “The Power of the Dog,” “Mank,” and “Ma Rainey’s Black Bottom.” In 2023, their animated film “Guillermo del Toro’s Pinocchio” won an Academy Award for Best Animated Feature, further solidifying Netflix’s reputation for high-quality content.

Recently, Netflix has expanded beyond standard movies and TV titles with the addition of video podcasts, and is also exploring a digital store that would offer third-party streamers within the app.

Netflix offers three plans – stream on 2 devices in HD with the “Standard with Ads” ($8.99) plan, on 2 devices in HD with the “Standard” ($19.99) plan, and 4 devices in up to 4K on the “Premium” ($26.99) plan.

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