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YouTube and Netflix are each embracing parts of the others business model. YouTube, which made $36 billion from ads in 2024, is testing a cheaper, ad-free "Premium Lite" tier in markets like the US and Australia. The goal? Convert more users into paying subscribers while keeping music videos ad-supported.
Netflix, once staunchly against ads, has embraced them since launching an ad-supported tier in 2022. Now, over 55% of new subscribers in ad-tier regions choose the cheaper plan. While ads aren't yet a major revenue driver for Netflix, co-CEO Gregory Peters expects the business to "transition from crawl to walk" in 2025.
Meanwhile, YouTube's dominance continues to grow, with total revenue surpassing $50 billion last year, about 70% from ads and 30% from subscriptions. More people now watch YouTube on TVs than on phones, making it a bigger rival to Netflix than traditional streamers like Disney and Amazon.
Luckily, our model portfolio has both YouTube-owner Alphabet and Netflix.
