Netflix Has Dominated in Advertising Dollars Per Viewer. Could Its Lead Be Narrowing?

Netflix (NFLX), already the top U.S. streaming service by number of subscribers, is also making the most money per user from airing advertisements, although its lead over competitors is likely to narrow in the coming years,

Netflix’s revenue per user of its advertisement-supported plan is expected to hit $70.44 this year, but that is likely to drop to $59.67 per user by 2026, according to data from digital marketing research firm Emarketer. This is important as more streamers look to ad-supported tiers to wring more revenue from their services.

Last year, streaming service providers including Netflix and some of its competitors initiated or announced price increases, mostly on ad-free options, hoping to drive users to ad-supported tiers. In the face of higher costs to create and maintain content libraries, slower subscriber growth rates and inflation, streamers are looking to bring in different types of revenue through advertising.

Streaming Leaders Will See Less Revenue Per Ad-Supported Subscriber

Netflix, for its part, is planning to focus on growing its ad-supported business this year. The company said in April that subscriptions for its ad-supported tier jumped by 65% from the same time during the prior year.

That could bode well for the company, as it makes almost twice as much per viewer as the closest competitor, Hulu. Hulu has six times more ad-supported viewers in the U.S. than Netflix, the Emarketer report showed and is gaining traction as owner Walt Disney (DIS) is offering bundled packages to attract more subscribers. 

However, both Hulu and Netflix are projected to make less money per ad-supported subscribers in the coming years, eMarketer’s projections showed. EMarketer did not explain why it thinks the pair will see less ad revenue per subscriber in the coming years.

Streamers With the Lowest Revenue Per Subscriber Are Projected to Grow

Alternatively, the streamers with the lowest revenue from users of ad-supported services are seen gaining over the next two years, with Max, Peacock, and Paramount+ expected to report increased revenue over that period.

Paramount’s (PARA) streaming ad revenue is expected to grow despite the uncertainty surrounding the future of the company after merger negotiations with Skydance Media fell apart last week. 

Also appearing in the field of competitors to Netflix is Amazon’s (AMZN)  Prime Video, which has introduced ads to its video service, too. Chief Executive Officer (CEO) Andy Jassy has said he sees a “significant opportunity” for ad revenue from its newly introduced ad-tier video service.