Mar 4, 2022

Disney+ will introduce ad-supported subscription offerings 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:

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+.