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They're banking on their service still being better. In the short term they assume their particular selection of content will provide some inertia to your decision to move, and long term they expect all of the other options are going to do the same thing. Eventually, you'll only be able to stream with commercials, and they'll be back to the balance of their content being the only deciding factor.
I think that's definitely part of it. I think another part is that they don't do ads right away so people will switch to them, then they add them assuming people will either forget to cancel, or just decide that since they're already there they may as well keep it anyway.