Disney recently announced plans to introduce a lower priced, ad-supported subscription tier for their digital streaming video service, Disney+. The announcement comes as subscription growth for their premium ad-free service has declined. The company added only 12 million new subscribers over the last quarter but expects to reach between 230 million and 260 million total subscribers worldwide by 2024 – roughly doubling the 130 million that it has currently. While there are no details about the timing or pricing of the new ad supported level, it is expected to roll out first in the US this year, followed by an international launch in 2023.
Many other streaming platforms, including Hulu (which is majority-owned by Disney), Paramount+, and HBO Max, have seen success with a lower priced or free ad-supported subscription level for their services. The ad-supported model is well established and proven. Interpret’s VideoWatch data shows that 55% of Disney+ viewers are already consuming content on ad-supported services.
Ad-supported streaming gives streaming services dual revenue sources, as they earn revenue from the subscriptions themselves as well as advertising revenue from advertising partners. Having multiple pricing options gives them more opportunities to bring in potential subscribers who may not otherwise subscribe to the higher priced ad-free tier. Lower priced, ad-supported tiers are popular among consumers, and when both are offered, more people tend to go for the cheaper ad-supported option. Interpret data shows that 56% of Hulu subscribers are signed up for the ad-supported tier.
“When Disney first entered the subscription OTT space, it redefined the benchmarks for success for a new streaming service. Prior to its entry, companies were pleased to exceed 1 or 2 million subscribers. When Disney was able to quickly capture millions of customers, they set a high bar for others to reach,” said Brett Sappington, Vice President at Interpret. “The same could happen in the ad-supported streaming space as well. With its large current subscribership, a known content brand, and existing relationships with advertisers through its television business, Disney+ is well positioned for success with an ad-supported tier.”
Disney is hoping that the introduction of an ad-supported tier will help boost their subscriber base while also bolstering their bottom line with the additional advertising revenue. With its large subscriber base and premium exclusive content from franchises such as Star Wars, Marvel, and Pixar, Disney+ is likely to be an in-demand property for advertisers.