Not long ago, streaming TV promised: Sign up and commercials will become a thing of the past.
Netflix has risen to streaming dominance in part by luring customers with an ad-free experience, followed by Amazon Prime Video, Disney+ and HBO Max.
Well, that didn't last long.
Ads are becoming harder to avoid on streaming services: Netflix, Disney+, Peacock, Paramount+ and Max are each adding 30- and 60-second commercials in exchange for slightly cheaper subscription fees. Amazon turns ads on by default. And when watching live sports on these services, commercial breaks are built in, regardless of the price.
The importance of advertising was underscored this month when both Amazon and Netflix gave their first in-person presentations at the so-called “upfronts,” the decades-old TV event held in New York where media companies hope to woo advertisers.
Netflix sent out Shonda Rhimes, executive producer of “Bridgerton” and creator of “Grey's Anatomy,” to talk to marketers about the service, and Amazon's event drew celebrities like Reese Witherspoon and Jake Gyllenhaal and featured a live performance by Alicia Keys.
“Remember when streamers said, 'We're doing TV in a new way, and unfortunately we don't think we need your little commercials anymore?'” “Late Night” host Seth Meyers told advertisers at an event this month. “A few years later, every episode of 'Shogun' is punctuated with 'Whopper, Whopper, Double Whopper!'”
Or as one frustrated consumer put it on social media last week: “Why should I pay for Prime Video and have to watch so many commercials? It's starting to get annoying.”
Representatives for Netflix and Amazon declined to comment.
The shift in viewing experience may have been inevitable: Over the past decade, media companies have raced to launch streaming services to compete with Netflix, prioritizing subscriber numbers above all else.
There was just one problem: profits.
Companies are bleeding cash, Wall Street is disappointed in their businesses, and executives are trying to turn back the clock. They're ordering network staples like medical dramas, courtroom dramas and sitcoms at lower costs, offering bundled packages to discourage consumers from clicking the cancel button (for example, Disney+, Hulu and Max are joining forces later this year), and embracing commercials as a way to boost revenue.
“The crazy thing is, we might end up going back to Texaco Presents,” says Chuck Lorre, the comedy hitmaker behind such hit shows as Young Sheldon, Two and a Half Men and The Big Bang Theory. “I'm old enough to remember Fred and Barney smoking on The Flintstones because the show was funded by tobacco companies.”
Consumers can still avoid most ads for a fee: Most streaming services, including Amazon's, still have ad-free versions, but subscribers must pay an extra $3 per month to skip ads. Apple TV+ continues to offer only an ad-free experience.
But the commercial tier is becoming increasingly essential to their business: There were at least 93 million ad-supported streaming subscriptions in the U.S. at the end of last year, according to estimates by industry analyst Brian Wieser and subscription research firm Antenna. As Amazon switched automatically to ads and other streaming services gained more ad-tier customers, Wieser and Antenna estimate there are now at least 170 million ad-supported subscriptions.
According to Antenna, 56% of new subscribers to streaming services chose lower-cost ad-supported plans in the first three months of 2024, up from 39% a year earlier, the company said.
Executives have sought to assure subscribers that advertising will return but won't be as overwhelming as traditional TV.
Just a few years ago, episodes of top cable dramas like Ryan Murphy's “American Crime Story” were interrupted by 21 minutes of commercials. But streaming services now allow for much less time for ads. On Disney+, for example, commercials average four minutes per hour. On Hulu, they're just over six minutes.
“There's always been this idea that people don't like advertising,” said Rita Ferro, Disney's president of advertising sales. “I don't think that's true. People don't like bad advertising or bad ad experiences.”
She argued that in the data-rich world of streaming, the advertising experience is more informed than traditional TV, with companies knowing people's viewing preferences and “what products are relevant to you.”
Wieser, an analyst and founder of consulting firm Madison & Wall, said he expects media companies' overall ad revenues to continue to decline even as ads run on streaming services. He predicts that time spent watching TV ads, both streaming and traditional network and cable, will fall 24% by 2027 compared to last year.
One reason, he says, is that many people will continue to pay extra to avoid ads on services like Netflix: “The vast majority of Netflix subscribers will never choose the ad-supported option, no matter what the price,” he says.
Still, viewers may not have a choice: Netflix subscribers who pay at least $15 a month for an ad-free plan will still see commercials when they watch this year's two NFL Christmas games or next year's WWE show, as will subscribers to Peacock, Paramount+ and Prime Video, which also offer live sports.
“Amazon is selling the NFL. How is that different from what Fox or CBS is selling?” said Joe Marchese, former head of ad sales at Fox Networks Group and now a venture capitalist. “Netflix is selling Shonda Rhimes shows. What they're selling to advertisers is cultural creation. You want to sell adjacent to that? It sounds exactly the same. The only difference is who's doing it.”
And in some cases, it could shatter half a century of precedent.
For decades, HBO hadn't offered any commercials, but now advertisers can place commercials on Max during older HBO programming or before new HBO series. During the company's upfront presentation to advertisers, executives played clips from a commercial for the GMC Sierra pickup truck that aired on Max before HBO's “True Detective.”
Particularly striking was watching HBO chairman Casey Bloys, a 20-year veteran of the network who is more accustomed to developing scripts than pitching to marketers, touting shows that “reach multiple audiences” upfront. As he recited statistics about the viewership of the HBO documentary series “Hard Knocks,” Bloys stammered, chuckled and said, “That's my first advertising joke.”
At Disney's upfront event, ABC late-night host Jimmy Kimmel mocked media companies' sudden return to their roots, bundling various streaming services into one package. “People turn on their TV and get all their channels in one package, for one price, all ad-supported,” Kimmel said. “We're calling it basic cable, and you're going to be amazed.”
Kimmel then took aim at Netflix, telling its marketers, “They've been ignoring you and mocking you for years.”
“Remember when Netflix thought they were above all this?” he said. “They came in and they disrupted commercial television. And now what do they want to sell you? Commercials on TV.”