Disney+ confirmed rumors last week they plan to add a cheaper ad-supported tier to the popular streaming subscription service. The new tier will be launched in the U.S. in late 2022 and to international markets throughout 2023. Disney did not announce additional details such as pricing or ad formats. Disney currently offers ad-supported tiers of both Hulu and ESPN+, as well as a bundled offering with all three streaming services. Rita Ferro of Disney said that the company couldn’t wait to share more information with their advertisers at the company’s advertising Upfront, coming May 17.
“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, in a March 4, 2022 news release. “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.”
Disney+ originally launched in November of 2019 as an ad-free experience. Using that model, Disney has attracted 129.8 million subscribers to Disney+ and Disney+ Hotstar. Disney said the addition of an ad-supported tier to Disney+ is part of the company’s long-term strategy to grow to between 230 million and 260 million Disney+ subscribers by fiscal year 2024.
According to The Hollywood Reporter, Disney originally considered launching their direct-to-consumer streaming service with an ad-supported tier but wanted to focus on growing subscribers. At that time, their content library was much smaller than it is currently.
For comparison, Hulu, owned by Disney, offers an ad-supported tier for $6.99 per month. This tier of the streaming service brings in as much in ad revenue as it does in subscription revenue. Disney+ has a lot to potentially gain from this move. Hulu’s ad-free tier is priced at $12.99 per month, while ESPN+ has ads, no matter what you pay. Business Insider states that it’s just like regular TV when it comes to live sports, but their exclusive video content does come ad-free.
Hulu is not the only other streaming service to have ads on its interface. HBO Max, which launched ad-free in May 2020, began offering an ad-supported tier in June of last year and doing so has been critical to growing their subscriber base. HBO Max’s ad-supported tier is available for $9.99 a month, allowing subscribers to watch HBO Max programming with limited ads and exclusive streaming access to Warner Bros. movies. Their ad-free tier is $14.99 a month. In addition to an ad-free experience, subscribers can download programs to watch on-the-go and stream select programs in 4K UHD.
Peacock also has a tiered system, but each includes some ads. There is a free plan, Peacock Premium at $4.99 a month which has movies, TV shows, live sports and more, and Peacock Premium Plus at $9.99 a month. This includes everything in the Peacock Premium plan, but it is mostly ad-free. Due to streaming rights, “a small amount of programming” will still display ads.
While many of us groan when subscribing to an ad-supported streaming service, it is a smart move for subscription businesses to diversify their revenue by allowing ad-supported tiers. The subscription services earn advertising revenue which they use to support operations, including the ability to purchase and produce more content for subscribers. With well-loved brands like Star Wars, Marvel and more, advertisers will definitely want a piece of Disney’s airtime. Subscribers win too, because they get access to Disney’s great content at a lower price, if they are willing to consumer a few ads. This allows subscribers, especially those that are price sensitive, to sign up for more streaming services.