> 1) People straight up don't want to see ads. Ad blockers, Netflix, etc. are a natural response to this. If your medium relies on traditional ads, there's an increasingly large chance that your audience won't ever see those ads in the first place.
If Netflix was free but with ads (with ad-less subscriptions optional) their viewership and subscriptions would skyrocket, and end up supporting traditional advertising on a modern medium. The only thing I see in the way of something like this is ISPs refusing to give Netflix the bandwidth needed for something this massive. For this to be a possibility either the FCC makes ISPs a utility, or net-neutrality is repealed.
You forgot "very cheap". Compare the price of a monthly netflix binge watch session with what it would cost on Amazon, or God help you, iTunes or Google play.
It's like 90% cheaper.
The reason for this is obvious on the Netflix balance sheets. They spent 3-5 times what came in.
Of course, this is not what the content producers want. And that's where things have gone wrong in the past, and will go wrong again.
You're just describing why a) YouTube or Hulu is so popular, b) why they suck, but somehow c) they haven't brought down the internet yet.
In fact, Netflix and HBO are virtually the only people who actually allow you to reliably avoid ads. Even Hulu finds ways to force them down your throat when you pay.
If Netflix was free but with ads (with ad-less subscriptions optional) their viewership and subscriptions would skyrocket, and end up supporting traditional advertising on a modern medium. The only thing I see in the way of something like this is ISPs refusing to give Netflix the bandwidth needed for something this massive. For this to be a possibility either the FCC makes ISPs a utility, or net-neutrality is repealed.