CPM gap between Netflix and Hulu narrows as ad-supported streaming gains traction

In the evolving landscape of streaming services, the ad cost per thousand (CPM) gap between Netflix and Hulu has undergone significant changes over the past year, closing in to create a projected difference of approximately $21.73, as outlined in Insider Intelligence’s latest “Streaming Service CPMs 2023” report. Notably, this transformation highlights Netflix’s adjustments to its initial pricing strategy, emphasizing the platform’s adaptability to the shifting market dynamics. 

Netflix’s initial CPMs were notably high, potentially seen as wishful pricing by the streaming giant. However, in response to market demands and to cater to advertisers, the company subsequently recalibrated its pricing structure.

The report suggests that Netflix’s advertising revenues within the United States are poised to reach approximately $1.07 billion in the upcoming year. This surge indicates a growing willingness among advertisers to leverage Netflix’s extensive user base and ad inventory.

The narrowing CPM gap is emblematic of broader industry trends. Streaming platforms are increasingly recognizing the value of ad-supported subscription tiers, which tend to be more cost-effective for viewers. This shift is partially driven by price hikes in premium plans and efforts to curtail password sharing.

In this scenario, Disney+ is projected to follow suit, with estimated ad revenues in the vicinity of $1.01 billion. As more streaming platforms consider incorporating ad-supported options, they have the potential to reshape the competitive dynamics within the industry.

Netflix pioneered this shift to ad-supported tiers by introducing its Basic with Ads tier in November of the previous year. Disney+ swiftly followed in December by launching its ad-supported subscription tier, aptly named Disney+ Basic, which was made accessible to users in the United States.

However, in July of this year, Netflix rebranded its tier, naming it “Standard with Ads,” as the streaming giant discontinued its cheapest ad-free tier (basic plan) in the US and the UK.