Disney Plus Adding Cheaper Ad-Supported Tier As Consumers Balk At Streaming Costs

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Coming soon to Disney Plus: commercials.

On Friday, Disney announced that it will offer a cheaper, ad-supported tier of its flagship streaming service, joining other major streaming platforms in giving subscribers an ad-supported option. The Burbank-based media giant did not disclose how much the less expensive tier will cost—Disney Plus is currently priced at $7.99 per month—but said it will roll out in the U.S. later this year, with plans to launch it globally in 2023.

“Expanding access to Disney Plus to a broader audience at a lower price point is a win for everyone—consumers, advertisers and our storytellers,” Kareem Daniel, Disney’s chairman of media and entertainment distribution, said in a statement.

The move isn’t surprising given the growing consumer demand for cheaper streaming options. Subscription analytics firm Antenna released data last week showing that consumers increasingly opted for less expensive, ad-supported subscriptions in 2021 than in previous years. Ad-supported sign-ups grew more than 117% year-over-year, from 19.4 million in 2020 to 42.2 million last year, according to Antenna.

At the same time, a recent survey by tech consultancy Concepts Rise indicated that many users are likely to ditch a streaming service this year because of the cost.

Disney views the ad-supported offering as a way to reach its long-term target of 230 million to 260 million Disney Plus subscribers by its 2024 fiscal year. The streaming service had 129.8 million subscribers as of Jan. 1.

But some analysts are already questioning whether Disney has made the right call. Analysts at media research firm LightShed Partners noted that inserting ads can lower users’ streaming consumption, adding that Disney’s addition of an ad-supported tier “feels premature.”

“The key now is driving usage so that Disney can capture more consumer time spent per household per day,” LightShed analysts Rich Greenfield, Brandon Ross and Mark Kelley wrote on Friday. “Lowering price and jamming in ads does not feel like the answer to driving usage—if anything it feels like it will have the opposite effect.”

Disney joins the likes of HBO Max, Paramount Plus and NBCUniversal’s Peacock in offering an ad-supported option. The company also offers a bundle that packages Disney Plus with its Hulu and ESPN Plus streaming services. Rather than releasing entire seasons of content at once, Disney Plus has joined other streaming platforms in opting to drop one episode at a time on a weekly basis—a move partly designed to keep users, who may otherwise binge-watch a show and then cancel their subscriptions, on the platform for a longer period.