Disney+ is about to get less expensive.
The flagship streaming service of The Walt Disney Co. is adding a less-expensive ad-supported tier starting later this year, with plans to launch an international option in 2023.
“Expanding access to Disney+ to a broader audience at a lower price point is a win for everyone — consumers, advertisers, and our storytellers,” Kareem Daniel, chairman of Disney Media and Entertainment Distribution, said in statement. “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.”
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Disney executives had toyed with the idea of launching Disney+ with an ad-supported tier, and an ad-free tier, a strategy that would mirror efforts from other major entertainment conglomerates. However, when Disney+ launched in November 2019, it did so without any advertising. A source at the company said at the time that with a smaller library than Netflix (and a lower price point already), they wanted to focus on growing subscribers, knowing that the option to add advertising would be available if growth slowed.
Subscriber growth for Disney+ did slow last year, particularly in North America. And while last quarter the company added more Disney+ subscribers than forecast (it now has about 130 million), much of that growth is overseas in markets with lower pricing. A new lower-cost ad tier in the U.S. could help spur fresh growth here, while adding substantial revenue.
In a statement, Disney’s head of ad sales, Rita Ferro ,said that she will share more about the plan at the company’s upfront presentation in May, adding that “advertisers have been clamoring for the opportunity” to partner with Disney+.
The value of advertising is significant. Disney’s other major streaming service, Hulu, offers an ad-supported tier for $6.99 per month, and brings in about as much ad revenue from those users as it does subscription revenue. With its wider reach (Hulu only has 45 million subscribers), Disney+ has the potential to generate significantly more ad revenue.
With Disney+ getting ads, Netflix and Apple TV+ will effectively become the only major streaming services without advertising to support them. Netflix executives have long cited their ad-free environment as a differentiator, though marketers have long coveted the streaming service’s reach and engagement.
