Disney+ subscribes to ads to boost profit margins
Future. Disney recently announced that it is rolling out an ad-supported tier of Disney+, citing high advertiser-demand and outsized average revenue per user (as Hulu’s model has demonstrated) to drive financial success and renewed subscriber growth. With Disney+ now joining almost every other streaming service in the battle for advertising, Netflix may feel the pressure to also join the club… something that it hasn’t entirely ruled out.
Disney wants a piece of that sweet, sweet advertising money for streaming (that it’s used to getting from network TV).
- At Disney’s recent Investor Day, the company announced that it would roll out a less expensive, ad-supported tier of Disney+ in the U.S. later this year and internationally by 2023.
- It will reportedly have an ad load comparable to Peacock and HBO Max — around nine ads per hour of programming.
- However, some analysts believe that Disney will see dollar signs and raise that ad load to its Hulu level (around 12 ads an hour) because of high demand.
While CFO Christine McCarthy said that the strategy shift was because of “consumer choice,” it’s hard for Disney to hide the fact that it also wants the same average revenue per user (ARPU) that Hulu enjoys — nearly $13, even though most Hulu users subscribe to its ad-supported $7/month tier.
A Tale of Two Bobs
While former CEO Bob Iger didn’t want ads on D+ in order to protect Disney’s premium brand, current CEO Bob Chapek has been more open to pushing Disney out of its comfort zone.
- Disney+ is testing other new ad-supported features like sponsored trivia on films being viewed and a pre-roll spoof of “Let’s All Go to the Lobby” called “Let’s All Go to the Pantry.”
- It may also expand its offerings to include horror and thriller movies and shows.
- ESPN+ is exploring sports betting partnerships.
It’s clear that Chapek is trying to make his mark on the brand now that he has full control, and the broadening of content on D+ and inclusion of advertising could pave the way for Disney+, Hulu, and ESPN to all fold into one super streaming service.