Mar 4, 2022 - Economy

Disney+ to launch an ad-supported tier in U.S.

Photo Illustration: Rafael Henrique/SOPA Images/LightRocket via Getty Images

Disney on Friday said it would debut an ad-supported tier for Disney+ in the U.S. by the end of the year. It plans to reveal the price of the new plan later this year.

Why it matters: The ad-supported tier, which will presumably cost much less than Disney+'s current $8 monthly subscription in North America, will help the company accrue more customers who may be looking to save money as the subscription streaming landscape becomes more crowded.

  • Disney currently has nearly 200 million subscribers globally. A paid tier could also help it reach its long-term subscriber goal of 230 million to 260 million by 2024.

Be smart: The new tier also creates more ad inventory for Disney to sell alongside ads on its linear TV channels.

  • Currently, more than 40% of Disney's video ad inventory comes from streaming across Hulu and ESPN+, a Disney ad executive recently told Axios.
  • It will also help Disney make more money off of each user than it currently does. The average revenue per paid subscriber of Disney+ is $6.68 in North America, compared to roughly $14 for Netflix.
  • The ad-supported tier will be available in conjunction with the ad-free subscription tier.

Between the lines: Disney's Hulu has long led the industry on ad innovation, debuting things like pause ads and binge ads years ago, before most streamers had started to even experiment with new types of digital ad breaks.

  • Disney said in a statement that this type of ad innovation will soon extend to Disney+.

The big picture: Several of Disney's rivals have already introduced ad-supported plans, including Peacock, Paramount+, HBO Max and Discovery+.

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Data: Axios research; Chart: Danielle Alberti/Axios

What's next: The company plans to expand its ad-supported tier internationally in 2023.

  • Some markets, like Disney+ Hotstar in India, already include ads.
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