Blame consumers for this. If a company sells a service for $10/mo ad-free and $9/mo completely loaded with ads, most people will pick the latter plan. Why won't they offer it then?
The real question is, why don't they have a completely free plan supported entirely by ads -- don't even try to get a huge premium for the ads, just sell lots of them, even if it's a 1:1 time relationship between ads and content. And then have another plan where you pay money and have zero ads.
Because the latter scheme should be the most profitable. To begin with you open up the market to people who wouldn't pay you at all but would watch ads, so you get more viewers, and on top of that it's effectively try before you buy where the trial requires watching ads, which means you can stay on it as long as you like because the service is still making money. People start watching a show and get tired of seeing ads so they subscribe, when they otherwise would never have started. Then you don't charge $10/mo for no ads, you charge $20, which is worth it to a lot of people because there are so many ads in the free version, and for the people it isn't you still make money from them by showing them lots of ads.
No the people who pay the extra are the ones who are most able to afford it. The outcome is still the same though as these are the people the advertisers want to target.
The people who can't afford the extra dollar are of very little value to the advertisers.
Except that you can't get those people anyway because they value time more than money so they'll just buy some other content with no ads in it from someone else. Also, that doesn't matter if you just price the paid offering at the level that it makes up the actual ad revenue from the people who would use it.
> The people who can't afford the extra dollar are of very little value to the advertisers.
Rubbish. People are often budget constrained because they have high expenses rather than low income, e.g. anyone with kids. Being able to divert that spending to your brand from a competing brand has significant value to advertisers.
Seriously. There’s a lot of spaces where the options are pigeonholed. Where the middle option, if it exists, exists to ladder, not to provide actual value. The problem is you’re using Econ 101 but real world economics is quite a bit more complicated and nuanced
I don't because in this case that's not an option. Is either free with shitty ads or paid with "better" ads.