Disney announced it will be introducing an ad-supported version of Disney+ which could provide an additional boost to subscriber growth.
Disney (NYSE: DIS) is daring to go where no other streaming service has gone before — advertising. Now, if you’re already a Disney+ subscriber, don’t worry, you won’t start seeing pop-up ads or 5-second clips after every episode of a series binge. But, a cheaper version of the service is likely to roll out, and the current subscription will be the upsell.
How much will ad-supported Disney+ cost?
No details have been outlined yet as to how much the service will cost, if anything at all, but it will arrive in late 2022. We can be sure, however, that it will be well below the current ad-free subscription price which charges $79.99 for an annual subscription or $7.99 monthly.
Why is Disney adding an ad-supported version?
Disney CEO Bob Chapek detailed on its last earnings call that the company is aggressively chasing growth in its streaming segment. Its target is to have between 230 and 260 million active Disney+ subscribers by 2024 — more than Netflix currently has now — and this additional push towards optionality for customers could be the perfect recipe to reach that goal.
In a way, it’s a backward approach to how Google’s YouTube currently run their platform. Initially, it was all 100% free, and ads were part and parcel of the product, and now it has a no ads model that users can subscribe to at a premium.
Will this be a competitive advantage for Disney?
In a way, yes. There are any amount of options when it comes to streaming these days, so having an alternative cheaper version will always be a plus in a competitive landscape. Disney+ is certainly among the leaders — considering the power of its unique library of reusable and highly monetizable intellectual property — but Netflix is still the number one choice among consumers.
While the average American subscribes to 3.4 streaming services, and more than 70% of U.S. citizens subscribe to at least one streaming service, the same statistics don’t apply to international consumers. In the U.K. for example, it’s estimated that only 40% of consumers are subscribed to at least one streaming service. Furthermore, when we look at Disney+’s presence in the Europe, it’s far behind Netflix’s estimated 55% market share, as well as trailing the tail of second-place Amazon Prime’s 19% share too.
Here lies Disney’s opportunity. Penetrating the international markets that may be less willing to subscribe to multiple services, but more likely to try the cheaper model that can act as a future gateway to shift them over to Disney permanently. I for one support the move, and certainly won’t bet against the House of Mouse.