Disney+ to launch an ad-supported plan this year

Disney is considering the potential launch of a low-cost, ad-supported tier for its Disney+ streaming service in the U.S. “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 a statement.

The new tier would become available to U.S. users later this year, but international viewers would have to wait until 2023. “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,” Daniel said.

The company has considered the idea before but has now decided to pursue it to reach profitability on its direct-to-consumer business by 2024. The new tier provides a boost to new subscriber take up that are currently going through a lull. The combination of paid and advertising-supported tiers has already been implemented by WarnerMedia (HBO Max), Discovery, NBC Universal (Peacock), and Paramount Global. 

Disney currently has 129.8 million subscribers. It added 11.8 million paid subscribers in the quarter ending January 1, 2022, but only 2.1 million in the quarter before that. Subscriber growth for Disney+ did slow last year, particularly in North America. And while last quarter the company added more Disney+ subscribers than forecast, much of that growth is overseas in markets with lower pricing. The company's other major streaming service, Hulu, offers an ad-supported tier for $6.99 per month and brings in almost an equal amount of revenue for ad revenue from those users as it does subscription revenue. Disney+ is projected to generate significantly more ad revenue with a larger audience.