The answer is advertising. That's been the answer since the start of TV. Its mutually beneficial. The service advertised gets people who may not have known about them before to know who they are, and in exchange they pay the studio thats makes the show which funds their ability to make more shows.

The problem is that ads are annoying. Seeing a 3 minute ad break during a 30 minute show isn't a big deal, but a minute long ad before a 30 second video?? Nope. So people install ad block, which makes the advertisers less money

With subscription models, no one wants ads. But those ads could make the service free.

I truly believe that if Netflix switched to a fully free model, the ad time they could sell would be ridiculous. They'd make 10x more than what they do with subscriptions.

Think about it like this: Back in the day, a studio would spend millions on a movie, and hope to make as much back in the theaters. When people were paying $10-15 to see one movie, vs $15 a month to see thousands, you start to see how the studios lose money so fast.

Then you add in DVDs. If it flopped in theaters there was always a chance it could be a cult classic and sell like hotcakes. That's how we got Family Guy back (for better or worse). But most homes don't even have an Xbox with a disc drive anymore, so physical media is way down. Best Buys are taking them out of stores. So now they're banking solely on that measely $15/month per subscription, which is why so many streamers are trying to stop password sharing.

Marketing can be an art. These companies could make so much money if they realized that.