Earlier quoted context omitted.
But those two tiers are not really competing with each other, are they? I'd wager that most people are fixed in one group: either they will never watch anything with ads (e.g. me), or they just don't care about seeing ads. The former group will never switch to the ad-supported tier -- they'll just cancel if the price gets too high -- so the only calculation is price vs. retention among that group. Similarly, the latt…
Side note: I discovered by accident last week that uBlock Origin eliminates ads on Amazon Prime Video too. We don't often watch that service on anything other than our "smart" TV, but was watching one episode on a laptop with firefox while travelling and realized afterwards the very brief black screens were where ads would have been.
It works on Hulu too. You get a box at the beginning of the show saying "please turn off your ad blocker" but once you click OK it never comes up again.