Streaming paradox: More options, less clarity in business models

In just a few years, streaming platforms have pivoted from “subscription growth at all costs” to “actually, we need ads” to “maybe we need both.”

This whiplash-inducing strategy shift reflects an industry caught in a state of uncertainty, unable to settle on sustainable business models while frantically chasing contradictory revenue streams.

“This is the challenge for anyone looking to succeed in streaming,” said Peter Mayhead, CEO of Pebble. “Content costs are rising: Netflix and others have driven up quality and production costs in drama; sports viewers demand more cameras, more replays and more insights. Streamers need to build a multi-faceted monetization model, with revenues from subscriptions, sponsorship, advertising and ancillary sales to secure the service.”

The streaming landscape now resembles a chaotic laboratory experiment where even the scientists don’t know what they’re testing.

Major platforms have whipsawed between prioritizing subscriptions, advertising, or both, often contradicting their own messaging from just months earlier. This instability has left both consumers and advertisers confused about what they’re buying into.

Industry Insights: How platforms are balancing ads, subscriptions and viewer demands

When subscription-only became subscription-mostly

Remember when Netflix CEO Reed Hastings vowed in 2020 that the platform would never add advertising?

By 2022, the company launched an ad-supported tier. Disney+, similarly, launched as a premium ad-free experience only to introduce ad tiers. Meanwhile, completely free ad-supported services have proliferated through FAST channels.

Recent data from Parks Associates noted the extent of this shift: 59% of subscriptions across the eight leading streaming video-on-demand services in the third quarter of 2024 were basic-tier subscriptions with ads. The rise of ad-supported tiers comes as 46% of internet households have now cut the cord from traditional pay TV, representing 56 million households seeking alternatives.

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“Traditional revenue models based on national and local ad sales have been completely disrupted,” said Costa Nikols, strategy advisor for media and entertainment at Telos Alliance. “Broadcasters now face the challenge of delivering content to multiple streaming platforms, catering to both live and on-demand consumption.”

This disruption has created a marketplace where different models target different audiences, but the lines continue to blur.

“SVOD subscribers value an ad-free service; AVOD users choose the lower cost or ‘free’ services,” noted Cees van Versendaal, COO of MwareTV. “In a hybrid business model, AVOD can be used to upsell to SVOD, but the fundamentally different users mean that a full merge is unlikely to be successful.”

Yet despite van Versendaal’s skepticism, the industry continues pushing toward hybrid models that attempt to be all things to all viewers.

According to Deloitte’s “2025 Digital Media Trends” report, 54% of SVOD subscribers now use at least one ad-supported tier, an eight-point increase over the previous year.

“Hybrid models combining AVOD and SVOD are proving to be most effective due to their flexibility,” argued Michael Demb, VP of product strategy at TAG Video Systems. “Programmatic advertising, combined with dynamic ad insertion, enables personalization and maximizes inventory value.”

The result is a bewildering array of options for consumers who must now navigate tiers, bundles and constantly shifting value propositions.

The profitability puzzle remains unsolved

The challenge facing streamers isn’t just about finding revenue – it’s about finding enough revenue to offset the massive content investments they’ve made to attract subscribers in the first place.

Industry analysts estimated Netflix spent approximately $17 billion on content in 2024, while Disney’s combined streaming services (Disney+, Hulu and ESPN+) spent close to $30 billion. These eye-watering figures create enormous pressure to find sustainable business models.

Consumer fatigue appears to be setting in.

TiVo’s “Video Trends Report” found that average monthly entertainment spending dropped nearly $20 year-over-year, falling below $160 for the first time since 2021. Consumers reported using an average of 9.9 video services, down from 11.1 the previous year. Among those who canceled a SVOD service in the last six months, 17.0% cited low usage and 16.9% cited price increases as primary reasons.

“The number of streaming providers leads to fierce competition, which inevitably leads to price sensitivity,” said van Versendaal. This price sensitivity contradicts the need to charge more to achieve profitability, creating a fundamental tension in the business model.

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Meanwhile, traditional broadcasters watching this chaos unfold face their own challenges adapting to the streaming era.

“Traditional broadcasters built their operations around fixed infrastructure and long-established processes. To adapt to streaming, they’ve needed to become more agile,” said Chris Clarke, CRO and co-founder of Cerberus Tech.

This need for agility clashes with decades of established business practices.

Consolidation or continued chaos?

As streaming platforms struggle to find sustainable business models, industry experts increasingly predict consolidation. The current landscape of multiple competing services, each demanding monthly subscriptions, appears unsustainable, especially as churn rates climb.

Deloitte’s report indicates high churn rates among younger viewers, with over half of Gen Z and millennial users reporting canceling at least one SVOD service in the past six months. This volatility is driving services toward bundling strategies and other tactics to fight churn.

According to Bango’s “Subscriptions Assemble” report, more than two-thirds of U.S. subscribers now access at least one of their services through a bundled package rather than a direct subscription. The average U.S. subscriber pays for 5.4 subscriptions, two of which are obtained through indirect channels such as telecom providers or retailers.

“While there is no one-size-fits-all monetization model for streaming, the most effective models align closely with content type, audience behavior, and platform reach,” explained Clarke. “For some, that’s dynamic ad insertion in a FAST model. For others, it might be a pay-per-event approach or rights-based distribution to multiple platforms.”

This diversity of approaches suggests that in the future, platforms might more clearly differentiate their business models rather than all trying to occupy the same space. Such collaborations could potentially create more sustainable economics for streaming platforms currently struggling with profitability.

What remains clear is that the streaming industry has entered a new phase where subscription growth alone no longer satisfies investors.

Platforms must now demonstrate profitability and sustainable business models, a challenge that has so far eluded even the largest players.

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“To compete against legacy broadcasters and the big established names in streaming, service operators have to be agile, identifying market opportunities and getting to market very quickly,” said Mayhead. 

The question remains whether today’s streaming giants can achieve this agility, or whether their massive size and content investments have created economic models that simply cannot sustain themselves. The identity crisis continues, and the resolution remains far from clear.

Industry Insights: Is the FAST bubble about to burst or evolve