Streaming Ads Will Help Netflix’s Bottom Line More Than Disney’s, Analyst Says

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Disney+ will generate $1.8 billion in U.S. ad revenue by 2025 from its forthcoming ad-supported streaming tier, with Netflix coming in at $1.2 billion, Wall Street analyst Michael Nathanson estimates in a new report.While Disney will pile up more cash, Netflix’s bottom line will benefit more from the influx of ads given the impact of Disney’s theme parks on its balance sheet, Nathanson concluded in his report, which is titled “Mad Men to the Rescue.” On the global front, Netflix has more potential in the long run, Nathanson believes, though his report is confined to the U.S.

as a starting point.One main takeaway for Nathanson is that ad revenue should not be seen as a panacea. “While we are excited by the opportunity that advertising creates at these two streaming giants, the devil will be in the details of how each company prices these new offerings and how much of the available content impressions will be available and suitable for advertising,” he wrote.

Given the many variables and contractual issues to be worked out, he noted, “very little is known about the pricing and available commercial impressions of these new ad tiers.”Nathanson anticipates that most of the advertising on both companies’ platforms will come from “non-sports and news linear cable and broadcast network dollars.”Describing the report as “preliminary analysis,” Nathanson did not adjust his price target or ratings for Netflix and Disney stock as part of the new assessment, maintaining a “neutral” on both.Disney announced its plan to introduce ads to Disney+ on March 4.

Netflix followed the next month, but in a less formal fashion, with Co-CEO Reed Hastings mentioning it almost offhandedly during the company’s quarterly earnings interview.