I don't know what Hulu's numbers look like, but what % of US consumers who will spend $7.99 a month on something won't pay $11.99 instead to avoid commercials? If the gap was between free and $11.99 then I would very strongly agree with the price sensitivity.

Amazon and HBO are already basically forcing ads in front of the shows now though it remains self-promotional. There is a substantial amount of value that could be unlocked if TV ad budgets moved to Amazon and Netflix. Irregardless of current claims I wouldn't be surprised to see some form of sponsorship appear on Netflix if subscriber growth starts reaching its limits. Quite honestly strongly merchandised brands like Disney should be paying for video distribution rather than licensing it out.

On some level I think it actually is binary.

If I'm paying for content, but that content also has tons of ads I feel like the provider is double dipping. Charging me to access the content and making money from advertising.

If the content is distributed for free (as over the air TV originally was) then I understand the advertising supported model.

If I'm being charged for it then I think ads are not acceptable under any circumstance.

Consumers are sensitive to pricing relative to free, but when you're charging for both I suspect most would pay extra for no advertising.