Disney+ Introduces Ads to Streaming Platform – Is Netflix Next?
Streaming platforms have taken the world by storm in recent years. From SlingTV to Netflix to Peacock to Hulu, and more – the options available are seemingly endless. It’s estimated that by 2022, 55.1% of Americans will have cut the cord, and advertisers have taken notice of this growing market.
Disney’s streaming service, Disney+, launched in November 2019 and while it initially saw success, the platform’s growth has already slowed, especially in the U.S. market, even as its global subscriber base is ~100 million shy of industry leader Netflix’s. And as more and more streaming services choose to incorporate ads, Disney+ recently announced that they plan to do the same.
Disney+ will be introducing an ad-supported subscription into their streaming platform by late 2022. The news came as a surprise to many considering Disney’s CFO said at an investor day in December 2020, “We don’t believe that the consumer experience would be a particularly good one if we had advertising on Disney+.” Others saw the change in tune inevitable from recent findings:
- Disney+ revenue per subscriber is $4.41, while Netflix’s is $11.67, and ad-supported (and Disney-owned) Hulu’s is $12.96
- Disney+’s annual losses are in the billions
- Even Netflix, with the largest subscriber base and the highest price point in the industry (but no advertising revenue stream), generally does not generate positive cash from operations
- After initially encouraging aggressive investment, Wall Street has come down hard on media companies with large, loss-making streaming platforms
“The great news about Disney+’s ad support tier is that it represents the high momentum behind ad-supported streaming. Just a few years ago it would have been hard to imagine HBO with ads. Now, almost all major streaming platforms are ad-supported. Before diving into Disney+ advertising, carefully consider the difference between brand safety and brand suitability. Does your creative belong before The Little Mermaid? I’ll be keeping a close eye on how Disney controls advertising between its Super Hero and Princess catalogs.”
– Jesse Math, VP, Advanced TV & Video Solutions at Tinuiti
Disney+ Ad Details
As it currently stands, Disney+ is available as a standalone platform and also as a bundle that gives users the option to combine Disney+, ESPN+, and Hulu for a set rate. The new ad-supported option will give Disney+ the opportunity to compete with subscriptions that come in at lower price points.
“Expanding access to Disney+ to a broader audience at a lower price point is a win for everyone – consumers, advertisers, and our storytellers. 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.”
– Kareem Daniel, Chairman, Disney Media and Entertainment Distribution (Source)
Disney+ will still give users the opportunity to purchase a subscription that’s ad-free, but they have yet to divulge pricing information (we’ll keep you posted). Some might think Disney has slightly penned itself in by pricing its ad-free tier at $8 per month. Keep in mind, Hulu with ads is $7 per month, which would barely be a discount at all, and rival HBO Max is $10, already above Disney+’s ad-free price.
Disney noted, “the ad-supported offering is viewed as a building block in the company’s path to achieving its long-term target of 230-260 million Disney+ subscribers by FY24.” The rollout will begin in the U.S. in late 2022, with plans to expand internationally in 2023. But this announcement has many wondering, which platform will be next to introduce ads?
Are Ads Coming to Netflix?
Disney+ isn’t the only streaming service making waves this month. Netflix hinted at a recent investor conference that it might be open to offering an ad-supported version of the platform. Speaking at Morgan Stanley’s 2022 Technology, Media & Telecom Conference, CFO Spencer Neumann said, “It’s not like we have religion against advertising, to be clear. But that’s not something that’s in our plans right now… We have a really nice scalable subscription model, and again, never say never, but it’s not in our plan.”
The consideration doesn’t come as a surprise to advertisers considering many of Netflix’s competitors include ad-supported tiers like Hulu and Paramount Plus to name a few. Currently, the streaming giant reports healthy profits – $5.1 billion of net income for 2021 – but it does not consistently generate positive cash flows once programming expenses are accounted for. Netflix has the chance to generate billions of ad dollars if they do decide to introduce an ad-supported offering, but only time will tell if they greenlight the opportunity.
“Given its scale, Netflix introducing ads would be a seismic shift within the video advertising space. The move would introduce a large and diverse pool of viewers for brands to reach while solidifying the ad-supported model as the way of the future.”
– Stefanos Metaxas, Chief Strategy Officer at Bliss Point Media (Part of Tinuiti)
Interested in Leveraging Streaming Ads?
It’s no secret that streaming is the way of the future, but is your brand ready to take the leap into the world of streaming ads? At Tinuiti, we have a dedicated team of experts who can help you harness the power of video and audio streaming to reach your audience like never before. Want to learn more? Check out all that our Streaming+ services can offer your business or contact us to get started today.
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