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Netflix and Disney+ probably only added ad-tier subscribers this year, says Morgan Stanley

As streaming prices climb, ad-free subscribers are becoming a rarity.

12/18/25 1:02PM

A mass digital migration is taking place, with streaming subscribers leaving their original ad-free tiers as prices climb.

Those subscribers appear to be leaving for greener, louder, more sponsored pastures.

US streaming costs have grown 12% this year, the fourth straight year of double-digit hikes for the top 10 services, according to Convergence Research Group. The hikes appear to be having their intended effect: subscribers are leaving their pricey commercial-free plans behind and switching over to lower-cost, ad-backed subscriptions.

That works out for streamers like Netflix and Disney, since those plans bring the companies more revenue per user despite their lower cost.

The subscriber switchover trend appears to be growing, too. In a note on the entertainment year ahead published on Thursday, Morgan Stanley estimated that cheaper ad-supported streaming subscriptions now make up 30% of Netflix’s subscribers and half of Disney+ subscribers. That’s up from last year’s numbers: 20% for Netflix and 39% for Disney.

The firm also dropped a fascinating tidbit: it believes that ad tiers scored all net additional subscribers for both Netflix and Disney+ this year. The number of subscribers paying for the luxury of no commercials declined. Morgan Stanley wrote:

“Advertising supported streaming has been the primary area of subscriber growth in the past few years, as streamers looked to expand their user base and tap into a more price sensitive customer base. In fact, for both Netflix and Disney Plus, we think it is likely that over 100% of the US net additions in 2025 were through ad-supported tiers, while ad-free subscribers declined.”

This trend could become even more pronounced as streamers’ monetization improves. Morgan Stanley says the revenue streaming services bring in from ads has generally lagged expectations due to surges in inventory as more streamers build out their advertising tiers. As ad tiers become the new normal, that supply-demand calculation will likely even out in their favor.

Max Knoblauch20h

China’s EV startup trio have all become profitable

China’s EV startup trio, Nio, Li Auto, and XPeng, are now all profitable, following the latter’s Q4 results released Friday.

XPeng reported a quarterly net profit of about $55 million, compared to rival Nio’s Q4 net profit (also its first) of about $40 million. Li Auto posted Q4 net profit of less than $1 million.

All three companies being profitable offers a stark contrast to the EV market in the US, where Rivian quietly delayed its 2027 profitability target in a filing about its Uber robotaxi partnership yesterday. Lucid is likely further away, and last month cut 12% of its US workforce as part of its “path toward profitability.”

Still, it’s not all rosy for China’s EV startups, either. XPeng ADRs were down more than 6% in Friday morning trading as its Q1 sales forecast came in below estimates. As China rolls back subsidies, auto sales are slumping. Chinese retail EV and hybrid sales fell 32% in February from the same month last year.

9.3%

Max Knoblauch3/19/26

As the war with Iran produces the biggest spike in US gas prices since Hurricane Katrina, car retailer CarMax is continuing to see heightened interest in EVs, hybrids, and plug-in hybrids.

“From Feb 1st - March 1st (inclusive), compared to March 2nd to March 15th (inclusive), we saw a 9.3% lift in page views for these vehicles,” a spokesperson for the company told Sherwood News.

As industry insiders recently told us, EV interest climbs when gas prices rise. That appears to be holding true even without EV tax credits, which the Trump administration ended under its new budget package.

CarMax also saw EV searches spike in 2022, amid Russia’s invasion of Ukraine and the resulting oil price spike.

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trust me.

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$35.4B

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The tariffs imposed by the Trump administration have cost automakers at least $35.4 billion since the start of 2025, according to a new analysis by Automotive News.

That total will continue to climb this year, since the Supreme Court’s February tariff ruling largely leaves the 25% levy on vehicles and auto parts untouched.

Toyota has taken the biggest hit, projecting more than $9 billion in tariff costs in its fiscal year ending this month, while Detroit’s big three automakers — Ford, GM, and Stellantis — were hit with a combined $6.5 billion tariff charge in 2025.

In the fourth quarter, automakers sold about 8% fewer imported vehicles in the US compared to the same period a year ago, per the Automotive News Research & Data Center.

Tariff charges come at a rough time for legacy carmakers, which are also scaling back EV plans following the Trump administration’s elimination of tax credits and fuel standard goals. According to Automotive News, the cost of EV write-downs and restructuring is, so far, nearly $70 billion.

Netflix and Disney+ probably only added ad-tier subscribers this year, says Morgan Stanley

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