Analysts estimate that Disney+ could hit $1.8 billion in ad revenue by 2025, while Netflix could hit $1.2 billion.

Streaming giants Netflix and Walt Disney plan to release commercials at low prices to subscribers, MoffettNathanson analyst Michael Nathanson shared his estimates of how much ad revenue companies could generate in the coming years.

Disney+ could generate $1.8 billion in ad revenue by 2025, while Netflix could hit $1.2 billion, said Tuesday in a report titled “Mad Men to the Rescue?”, emphasizing that “very little is known”. impressions are new ads”.

Nathanson summarized his point of view: “Netflix has the potential to grow much more global advertising, but Disney+’s in-house advertising potential is greater because it has a much lower initial revenue per customer (RPU) than Netflix, an infrastructure of more developed ads”. . Higher demand, propensity for Disney content and access to more monetizable content as Disney owns most of its content.

The analyst also analyzed the reasons for the companies’ decisions and the moment to increase advertising levels. “Over the past 90 days, both Netflix and Disney have decided to reconsider their previous strategic decisions, developing ad-supported streaming services to complement their legacy ad-branded products,” he wrote. “Which Weird stuff on netflix and obi wan kenobi On Disney+, each has set a corresponding viewership record, and both companies are now trying to create a new ad-supported streaming product to open up a second revenue stream, increase customer acceptance, and increase overall revenue and profits.

So what has changed for the industry’s glory? “The most obvious answer is that slowing customer growth and the ability to expand access to all services at a low price, especially in emerging markets, has necessitated the development of an advertising-supported layer,” said a Wall expert. Street. . “In addition, if well managed, advertising has the ability to improve the margin profile and growth trajectory of each service.”

For example, “Adding high-yield ad dollars should increase 2025 operating margin by 200-300 basis points, respectively,” Nathanson said. “However, given the scale of other Disney businesses (e.g. Disney parks and resorts and linear networks), the direction of internal advertising is much higher than long-term (post-2025) earnings per share. ) of Netflix than Disney.

The analyst maintained his “neutral” rating on the shares of both companies, with a price target of $245 for Netflix and $125 for Disney. “We are not formally amending our assessments based on a preliminary analysis of this report,” concluded Nathansson. “While we are excited about the opportunity that advertising in these two streaming giants creates, the devil will be in the details of how each company evaluates these new offerings and how affordable the content impressions will be for available and appropriate advertising.” Overall, we believe that the increase in these promotional offers will largely result in unsportsmanlike and informational dollars from linear cable and broadcast networks.