Disney Plus’ big ad experiment is coming to the service later this year, meaning users will have the option to watch ads in exchange for a slightly cheaper subscription. On the one hand, that’s great news for streamers on a budget. Ad-supported plans give consumers a lot of flexibility to sign up for expensive services that they might otherwise miss. But it’s also a nice little solution to give subscribers a quick boost — something services are well aware of as they battle for our attention and money.
“We’re seeing an evolution of the market away from the monolithic business models of yesteryear,” Paul Erickson of research firm Parks Associates told Custom Hour. “Many players in the market will not only operate on an SVOD basis. They’re going to mix a little bit.”
We don’t know much about what Disney Plus’ advertising plan will look like yet. Pricing has not been announced and it’s not clear whether the new ad-supported tier will mirror the ad experience of sister service Hulu or appear closer to that of HBO Max or Peacock, which offer discounted ad plans that restrict access to some content.
What we do know is that Disney believes the new tier — expected by the end of 2022 — will help the service reach between 230 million and 260 million subscribers by 2024. 222 million active users). And at Morgan Stanley’s Technology, Media and Telecom Conference this week, senior executive vice president and CFO of The Walt Disney Company, Christine McCarthy, said the company views the advertising plan as “a win-win for the consumers who want it, the consumers who want it.” couldn’t afford it [Disney Plus] different.”
“It will be a different ad-supported platform than many others out there…”
Ads are not new to Disney as a company. Disney’s subsidiary Hulu knocks $6 off its ad-free subscription (normally $13) if you don’t mind perusing a handful of commercials during your streams. Disney’s sports service ESPN Plus also offers ads. But while Hulu — Disney’s “adult” streaming service — has some flexibility with the kinds of ads it can run against The Handmaid’s Tale of Archer, Disney knows it has to be extremely picky about the kinds of ads it throws at its kids and family service.
“It’s a family crowd,” McCarthy said. “We will be very careful with the ads we take, how we place them in our content.”
How and when ads will appear as part of the viewing experience is also something Disney is thinking about. McCarthy noted that linear programming, like TV shows, often lends itself to natural breaks, but movies can be a little trickier. But McCarthy claims the ad experience won’t be “shocking and off-topic or off-brand.”
“We’re going to be very, very aware of this, and it’s going to be a different ad-supported platform than a lot of the others out there, just because the nature of the service we provide is family-oriented,” McCarthy said.
Disney also has its image to keep in mind. When HBO Max announced its ad support tier last year, there was some question as to whether ads would lower the prestige of legacy HBO. Erickson doesn’t think this will be a problem for Disney. Instead, ads should make Disney Plus more accessible to a wider range of households. It’s fair to expect that Disney Plus, which launched in 2019 for $7 per month and now costs $8 per month, will only continue to increase its monthly cost. The ad tier counters the impact it will have on subscribers’ wallets (because every other service drives up their prices too).
“We’re probably going to see a few other players… hybridizing their business model as well.”
“Ultimately, they reach further and deeper into society than before,” says Erickson. And Disney would definitely want to be in every household — corporate boss Bob Chapek has hammered on Disney Plus’s appeal to even households without children†
Disney is already one of the largest streaming services in the US. But as two leading services, HBO Max and Disney Plus, launched ad-free and are now leaning towards ad-based streaming to grow their numbers, it signals a shift in the premium service space. Erickson says it’s possible we’ll see more streamers shifting to this model as well. (Many recently launched services, such as Peacock and Paramount Plus, have ad levels baked right into their plans.)
“Maybe not Netflix because they have such a strong market position. But we’ll probably see a few other players – the big ones that haven’t yet – hybridize their business model as well. It’s a natural trend in the market,” says Ericson.
For a long time, ads felt like a lazy carryover from the cable days. But with a veritable buffet of streaming options available, ad-supported tiers can help consumers avoid having to choose between so many of them. And even if Netflix is still on the fence About putting ads on its content soon, other streamers are aware that there is a huge market for viewers willing to chat for a few minutes if it means dropping their streaming bill by a few bucks each month.