Disney+ To Introduce An Ad-Supported Subscription Offering In Late 2022
The Walt Disney Company announced today that it will offer an ad-supported subscription to Disney+, in addition to its current ad-free option. The lower-priced service will launch in the U.S. in late 2022, with plans to expand internationally in 2023.
Why are they doing this now? The company has previously told investors that it has a long-term target of 230-260 million Disney+ subscribers by September 2024 (the end of the company’s fiscal year). The gameplan has gone well thus far – Disney added 11.8 new subscribers for the quarter ending January 1, 2022 and its subscriber base grew 37% for the full year to 129.8 million – however a lower-priced tier is additional insurance to ensure that Disney+ can keep adding subscribers at the current brisk pace. The company calls this latest move a “building block in [its] path to achieving its long-term target.”
Rich Greenfield, a financial analyst who follows the company closely, shared these thoughts about the new pricing model:
ad-supported @disneyplus tier thoughts $DIS
1) is sub growth slowing after raising price? lots of content coming, why cut price now?
2) if $7.99 is too expensive to grow D+ subs what does that mean for others?
3) pre-cursor to combining with Hulu which has ad-supported tier? https://t.co/EsffdGY0nd
— Rich Greenfield, LightShed 🔦 (@RichLightShed) March 3, 2022
Another good reason to move in this direction: Disney has been losing out on ad dollars since shifting its long-term strategy from cable to streaming. Putting ads on its service returns this revenue stream to the company. As Rita Ferro, president, advertising, Disney Media and Entertainment Distribution, said in a statement today: “Since its launch, advertisers have been clamoring for the opportunity to be part of Disney+ and not just because there’s a growing demand for more streaming inventory. Disney+ with advertising will offer marketers the most premium environment in streaming with our most beloved brands: Disney, Pixar, Star Wars, Marvel, and National Geographic.”
What is Disney’s distribution chairman saying? “Expanding access to Disney+ to a broader audience at a lower price point is a win for everyone—consumers, advertisers, and our storytellers,” said Kareem Daniel, chairman, Disney Media and Entertainment Distribution. “More consumers will be able to access our amazing content. Advertisers will be able to reach a wider audience, and our storytellers will be able to share their incredible work with more fans and families.”
Is Disney unique in offering an ad-supported service? Not really. Peacock, Paramount+, Discovery+, and Disney’s own Hulu already have ad-supported versions of their services. The completely ad-free services are now Netflix, Apple TV+, and Amazon’s Prime Video.
How much will the new ad-supported service cost? Pricing still hasn’t been announced.
Image at top: “The Proud Family: Louder and Prouder,” which premiered last month on Disney+.