The advertising model was working, and it was beginning to unlock new investment
At the LA Screenings gathering, Prime Video's Francisco Morales offered the streaming industry something it had long been searching for: a credible reason for hope. After two years of contraction, cancellations, and renegotiated futures, the sector appears to be finding its footing not by returning to the speculative excess of its youth, but by embracing the steadier discipline of advertising-supported revenue. What Morales described is less a triumph than a maturation — the moment an industry stops growing at any cost and begins, instead, to grow wisely.
- The streaming industry spent 2025 and 2026 in genuine crisis — budgets frozen, content pipelines gutted, and an entire ecosystem of producers and distributors left navigating sudden scarcity.
- The ad-supported tier, once treated as a consolation option for budget-conscious viewers, has quietly become the sector's most reliable engine of revenue and renewed confidence.
- Platforms that were canceling shows and hoarding cash are now licensing and acquiring again, signaling that the psychological freeze may be thawing as much as the financial one.
- The broader ecosystem — producers, distributors, licensors — is beginning to plan again, because platform budgets are becoming predictable enough to build around.
- By 2027 and 2028, advertising is expected to be the primary growth accelerator, transforming from an experiment into the structural foundation of a more durable streaming economy.
Francisco Morales took the stage at LA Screenings with a message the streaming world had been waiting to hear: the worst is behind us. As Head of Content Licensing & Strategy for Prime Video, he made the case for cautious optimism after a sector-wide retrenchment that had reshaped the industry almost beyond recognition.
The boom years of the early 2020s had run on a simple and ultimately unsustainable logic — chase subscribers at any cost, worry about profitability later. By 2025, later had arrived. Budgets froze, content pipelines contracted, and the producers, distributors, and licensors who had built their businesses around streaming's expansion found themselves in sudden scarcity. The reckoning was real, and it was consequential.
But Morales saw something shifting inside that constraint. The force driving the recovery, in his telling, was advertising. The ad-supported tier had moved from secondary option to primary engine, generating consistent revenue that was beginning to unlock new content investment. Platforms that had been canceling and retreating were licensing again, acquiring again — and the confidence returning to balance sheets was spreading through the broader ecosystem.
He framed the two-year contraction not as a catastrophe but as a necessary correction, the kind of market discipline that clears away unsustainable practices and forces an industry to build on firmer ground. Advertising, he argued, was that firmer ground — revenue that didn't depend on subscriber growth, and that allowed platforms to make longer-term commitments to content.
Looking toward 2027 and 2028, Morales was openly optimistic. The advertising-supported model was no longer an experiment; it had become the sector's primary growth vector. What he was describing, ultimately, was a maturation — an industry moving out of its speculative phase and into something more durable, more operational, and more capable of sustaining the creators and distributors who depend on it.
Francisco Morales stood at LA Screenings with a message the streaming industry had been waiting to hear: the worst is over. As Head of Content Licensing & Strategy for Prime Video, Morales laid out a case for cautious optimism about a sector that had spent the better part of two years in retrenchment. The platforms had cut budgets, renegotiated deals, and recalibrated their entire approach to profitability. Now, he argued, that painful adjustment was beginning to yield results.
The streaming landscape had become unrecognizable from the growth-at-all-costs era of the early 2020s. Platforms had burned through capital chasing subscribers without a clear path to sustainable returns. By 2025, the reckoning had arrived. Budgets froze. Content pipelines contracted. The entire ecosystem of producers, distributors, and licensors who depended on the streaming boom found themselves navigating sudden scarcity. But Morales saw something shifting in that constraint. The industry, he suggested, was finding its footing again—not by returning to the old model, but by discovering a new one.
At the heart of this recovery, Morales identified a single force: advertising. The ad-supported tier, once positioned as a secondary option for price-conscious viewers, had become the engine driving the sector forward. Morales was direct about it: the advertising model was working. More than that, it was generating a steady stream of revenue that was beginning to unlock new investment in content. Where platforms had been hoarding cash and canceling shows, they were now licensing again, acquiring again, building again. The psychological shift mattered as much as the financial one. Confidence was returning.
Morales framed this moment as the emergence of a new equilibrium—a rebalancing of the entire industry around sustainable economics rather than subscriber growth at any cost. The platforms were stabilizing their strategies. Their budgets were becoming predictable again. That predictability was what the broader ecosystem needed to function. Producers could plan. Distributors could invest. The licensing market, which had seized up during the downturn, was beginning to move.
He acknowledged the severity of what the industry had just endured. The two-year contraction from 2025 through 2026 had been real and consequential. But he positioned it not as a crisis but as a necessary correction—the kind of market discipline that clears away unsustainable practices and forces everyone to build on firmer ground. The advertising model, in his view, was that firmer ground. It provided recurring revenue independent of subscriber growth, which meant platforms could make longer-term commitments to content.
Looking ahead to 2027 and 2028, Morales's outlook was decidedly upbeat. The industry had found its new point of balance. The advertising-supported tier was no longer an experiment or a fallback option—it was the primary growth vector. That shift would accelerate everything: content acquisition, licensing deals, investment in original programming. The region's streaming market, which had been battered by the global retrenchment, would begin to recover in earnest.
What Morales was describing, in essence, was a maturation. The streaming industry was moving from a speculative phase into an operational one. The days of unlimited capital and exponential growth projections were behind it. What lay ahead was something more durable: a business model that could sustain itself through advertising revenue, that could support a healthy ecosystem of creators and distributors, and that could continue to grow without the kind of financial engineering that had nearly broken the entire sector. The recovery, he suggested, was already underway.
Notable Quotes
The market is beginning to recover and grow again, and we're seeing a new point of equilibrium emerge— Francisco Morales, Prime Video
The advertising side is functioning well; there's significant market opportunity there, and it will accelerate the industry forward— Francisco Morales, Prime Video
The Hearth Conversation Another angle on the story
When Morales talks about a "new equilibrium," what does he actually mean? Is the industry just smaller now, or is it fundamentally different?
It's both. The platforms are smaller in terms of spending, yes—they're not throwing money at every project anymore. But the structure is different. They're building on advertising revenue now, which is more stable than chasing subscriber growth. It's less volatile.
So advertising is the fix? That seems almost too simple for an industry that was supposedly in crisis.
It's not that advertising is magic. It's that it provides a revenue stream that doesn't depend on constantly acquiring new subscribers. That changes the entire calculus. You can make longer bets on content when you know money is coming in from ads.
But doesn't advertising-supported streaming mean lower quality? Cheaper content?
Not necessarily. It means different economics. You're not chasing the biggest subscriber numbers anymore, so you can be more selective. The money is steadier, even if it's not as explosive. That actually allows for more thoughtful investment.
Morales seemed very confident. Is that warranted, or is he just trying to talk up the market?
He's reading the room. The platforms have stopped the bleeding. Budgets are stabilizing. Producers are starting to get deals again. That's real. Whether it sustains depends on whether advertisers keep spending and whether viewers accept ads. But the immediate trajectory is clearly upward.
What happens if advertising doesn't grow as fast as he's betting on?
Then you're back to the drawing board. But right now, the ad tier is the only thing that's actually working. It's the bet everyone is making.