Netflix to introduce AI-generated ads during streams by 2026

Netflix (home of hit, and relevant show, “Black Mirror”) is rapidly expanding its advertising strategy with new AI-powered ad formats as streaming companies increasingly rely on ad-supported revenue models. The streaming giant’s push into interactive mid-roll and pause advertisements reflects the industry’s broader shift toward tiered pricing strategies that balance subscriber affordability with revenue diversification. These developments signal a fundamental transformation in how streaming platforms monetize content beyond traditional subscription fees.

The big picture: Netflix announced plans to introduce interactive mid-roll ads and AI-powered pause ads beginning in 2026, following successful tests of pause advertisements that started in July 2024.

• Amy Reinhard, Netflix’s president of advertising, claimed that “members pay as much attention to midroll ads as they do to the shows and movies themselves.”
• This expansion builds upon Netflix’s November 2022 launch of its ad-supported subscription tier, which now accounts for 94 million of its 300 million total subscribers.

By the numbers: Netflix’s advertising business is showing significant momentum in both subscriber acquisition and engagement metrics.

• Half of all new Netflix subscribers choose the $8 monthly ad-supported tier over ad-free options that start at $18 per month.
• Ad-tier subscribers spend an average of 41 hours per month on the platform, according to company statements to advertisers.
• The ad-supported subscriber base has grown 34% since November, indicating strong consumer acceptance of the lower-priced offering.

Behind the scenes: Netflix is rapidly building its advertising infrastructure to support this strategic shift.

• The company launched its own in-house advertising platform in the US in April, following an earlier debut in Canada, with plans for global expansion by June.
• Netflix aims to double its advertising revenue in 2025, with Reinhard stating that “the foundations of our ads business are in place, and going forward, the pace of progress will be even faster.”

The bigger trend: Netflix’s advertising push mirrors similar moves across the streaming industry as companies seek new revenue streams.

• Amazon recently announced contextual pause ads and shoppable ads for Prime Video coming this year.
• These developments reflect streaming platforms’ growing recognition that multi-tiered pricing strategies can expand their market reach while generating supplemental revenue.