How Warner Bros. Could Supercharge Netflix’s Advertising Business | Analysis

Three years after launch, Netflix’s advertising business started making a little noise in 2025. But with Warner Bros. and HBO Max in the fold, the streaming giant’s ad ambitions could be roaring in no time. 

A combination between Netflix and HBO Max, who have traditionally both been less reliant on advertising than most of their rivals, would give the former a much larger catalog of films and TV shows to sell ad inventory against, offering more leverage to better compete with legacy media for a larger slice of Madison Avenue’s dollars.

While much of the attention on the acquisition has focused on Warner Bros.’ valuable IP and its HBO Max subscriber base, no less important is its ability to supercharge Netflix’s advertising business. As the streaming giant prioritizes engagement over subscriber growth, the ad business becomes an increasingly critical part of its expansion, with Netflix eyeing roughly $9 billion in global ad sales by 2030 as it aspires to reach a $1 trillion market cap. 

There’s plenty of room to grow. The more than $1.5 billion in ad revenue generated by Netflix represents just 3% of its total revenue. During its fourth quarter earnings call last month, Netflix co-CEO Greg Peters said the the average revenue per user gap between its ad-supported and ad-free offerings would narrow as the business adds new ad partnerships and expands its features and measurement capabilities. 

Meanwhile, Warner Bros. Discovery, who has a total of 128 million streaming subscribers globally, does not provide a specific breakdown of ad-supported vs non ad-supported HBO Max subscribers, but previously said roughly half of new subscribers choose the ad-supported option. Expanding the ad tier’s reach in existing markets is one lever the company is pulling as it targets at least 150 million streaming subscribers by the end of 2026. 

“Whether HBO is bundled or rolled right into Netflix, the merger would bring in more ad-supported viewers and provide more valuable content for them to watch,” eMarketer senior analyst Ross Benes told TheWrap. “Netflix and HBO would have advertising scale more similar to Peacock, whereas right now each of them is more like Pluto in terms of ad volume size.”

A ‘core opportunity’ for Netflix’s expansion

Advertising is Netflix’s “core opportunity” moving forward as it looks to further capitalize on the 80% subscriber overlap with HBO Max, as well as the other 20% who don’t subscribe to both services, Wedbush Securities analyst Alicia Reese told TheWrap.

“There’s still a lot of flexibility for all of those overlapping subscribers to pay quite a bit more per subscription if you get all of that content in one place,” Reese said. “You also have a lot of people who are not willing to pay a lot for a subscription, but can be heavily monetized on the advertising stack and Netflix is so early on that.” 

Warner Bros.’ library of premium IP would also deliver “predictable viewing and broad demos” for Netflix’s ad tier, Paul Hardart, a former Warner Bros. executive and marketing professor at New York University’s Stern School of Business, told TheWrap, which could translate into more ad impressions on high-quality inventory.  

“Seinfeld, Curb Your Enthusiasm and Sex and the City are all examples of reliable syndication shows and are great ‘comfort food’ viewing. The shows were created with organic ad breaks, and they consistently deliver reliable audiences,” Hardart said. “This kind of content can definitely attract advertisers and help accelerate Netflix’s strategy in the ad tier.”

A new analysis by eMarketer forecasts that that Warner Bros. could significantly lift Netflix’s ad revenue outlook by 2027, assuming the deal and Discovery Global spinoff are finalized in 2026 and the pair launch a streaming bundle by the third quarter of 2027. 

The firm forecasts that Netflix would see connected TV ad revenue grow 29% to $3.41 billion in 2027 under a Warner Bros. deal. Under the no acquisition scenario, Netflix would still see 20% growth to $3.1 billion, but would lose the incremental ad-supported viewing and packaging benefits driven by a bundle with HBO Max and face limited upside due to a more fragmented streaming marketplace.

In comparison, if Paramount were to acquire WBD, Netflix would miss out on a $250 million incremental benefit from an HBO Max bundle and face tighter competition for premium ad budgets, resulting in lower growth of 19.7% to $3.16 billion, according to the firm’s forecast.

Meanwhile, HBO Max’s ad revenue would see a $196 million, or 35.5%, swing between its best and worst case scenarios. Under a Netflix deal, ad revenue would grow 44.9% to $800 million in 2027, compared to 20.3% growth to $665 million under a Paramount deal and 9.4% growth to $604.7 million under no acquisition, per the firm.

What about the broader ad industry?

EMarketer forecasts that total spending on connected TV (CTV) ads in 2027 would change by less than $120 million regardless of who acquires WBD, sitting at around $42 billion. Instead of a CTV ad market expansion, Netflix and HBO Max’s ad revenue growth would primarily come from existing dollars shifting away from linear TV.

“TV ad budgets structurally are not increasing. They’re just slowly eroding every year by a low single-digit percent,” Madison & Wall managing director Luke Stillman told TheWrap. “If the Netflix-Warner combination happens, linear networks are just going to have a harder and harder environment to operate in, because these big digital platforms are spending more on content than them, buying up all the sports rights that they can no longer afford and consumer viewing is naturally shifting to streaming platforms. So it paints a pretty grim picture for all the legacy broadcasters and a better picture for the pureplay streaming guys.”

When it comes to the 2026 upfront in May, one media buyer told TheWrap that a Warner Bros. deal is unlikely to be a major factor in this year’s negotiations, given the uncertain timing around the resolution of the M&A saga. 

The bigger factor to watch is whether the Discovery Global spinoff will prompt advertisers to spend less on linear TV, the person said. It also marks the first time Madison Avenue will negotiate with Paramount’s new leadership post-Skydance merger.

“[Paramount has] a new focus on how they’re selling. They have UFC this year, which they didn’t have in the past. So there’s an upside for them this year, regardless of what happens,” the media buyer added.

Longer-term, experts predict a Warner Bros combination with Netflix could give the combined entity more leverage over ad pricing, putting pressure on rivals such as Disney and NBCUniversal. 

“There is an argument to make that whoever gets it will have more leverage to say, ‘consolidate your budget with me, spend more with me now and we’ll give you more of a pricing advantage for spending more’,” the media buyer said. “Obviously, if an advertiser was spending with WBD and Netflix buys it, they will get more budget and be incentivized to get even more budget, because if I spent a million dollars with each last year and I grow to $3 million, maybe I’ll get more for my money.”

But Dave Morgan, the CEO of cross-channel TV advertising firm Simulmedia, says a Netflix-Warner Bros. deal is unlikely to have the same effect as when Amazon made its Prime Video subscribers ad-supported by default. At the time, the tech giant flooded the market with new supply overnight, which forced Netflix and other rivals to lower their cost per thousand impressions (CPMs) and gave increased negotiating power to advertisers.

“[Amazon] had an unusual position in the market and it could benefit by pushing a much heavier ad load in and pushing the CPMs down. I don’t know that would be a strategy that Netflix owning Warner Bros. would take and I don’t think it needs to,” Morgan said. “But it would establish itself as a very clear leader above Disney+ and Peacock and that would be hard for those companies.”

Though eMarketer warns that increased consolidation could actually put upward pressure on CPMs, Stillman is skeptical that a Netflix-Warner Bros combination would have enough leverage to do so on its own, given its smaller share in the context of overall TV ad budgets. He estimates streaming CPMs are declining by about 7% per year and doesn’t see a deal changing that trajectory.

“The bigger streaming gets and the greater share of money that goes over to streaming, the harder it is to maintain those CPMs that are triple what linear CPMs are,” he explained. “So if you’re an advertiser, it’s not that much of a different picture for you. You’re already probably moving your budget over to digital platforms pretty substantially from year to year. There are enough other places for advertisers to spend that they won’t move the market on their own.”

While advertisers will still have plenty of places to spend their budgets, a Netflix-Warner Bros. combination is sure to be a force to be reckoned with as they try to take a larger slice of linear TV’s shrinking pie.

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