Late last year, Disney+ launched an ad-supported tier in the United States, priced at $7.99 a month. This option was being made to offer more choices to consumers, while also increasing the revenue at Disney+ to become profitable.
Ad-supported tiers are becoming extremely important to streaming services, as a way of increasing revenue and keeping the price down low, as without it, prices would continue to soar. Other streaming services have also introduced ad-supported tiers. Disney has lots of success with Hulu, where most subscribers are on the cheapest ad-supported tier or bundle.
During a recent investors’ quarterly financial results call, Disney CEO Bob Iger shared an update on the success of the ad-supported tier in the US.
And I’m pleased to announce that as of the end of Q3, we’ve signed up 3.3 million subscribers to our ad-supported Disney+ option. Since its inception, 40% of new Disney+ subscribers are choosing an ad-supported product. On our pricing strategy, this year alone, we’ve raised prices in nearly 50 countries around the world to better reflect the value of our product offerings, and the impact on churn and retention has outperformed our expectations.
While the price of the non-ad tiers will go up later this year in the United States, the ad-supported tier will remain the same price, which will no doubt continue to pull in new subscribers in higher numbers, while also capturing some subscribers who want to downgrade. The addition of the bundle of Hulu and Disney+ for $9.99 with ads, is also a great value offering.
Also during the same event, Bob Iger announced that the ad-supported tier would be launching in Canada and select markets in Europe in November, which will offer a much cheaper alternative for subscribers, which will no doubt be popular due to the low cost and also for those who are looking to cut costs during the winter months.
And I’m pleased to share that our ad-supported Disney+ subscription offerings will become available in Canada and in select markets across Europe, beginning November 1st, while a new ad-free bundled subscription plan featuring Disney+ and Hulu will be available in the U.S. on September 6th. Maintaining access to our content for as broad an audience as possible is top of mind for us, which is why pricing for our stand-alone ad-supported Disney+ and Hulu offerings will remain unchanged.
Recently, a report from the London-based firm Ampere Analysis found that around 800,000 Disney+ subscribers in the U.S. are on ad-supported tiers, representing nearly 2% of each service’s total subscriber base. By comparison, more than 90% of Hulu subscribers are on the ad-supported tier, representing around 45 million subscriptions. This is why Disney is heavily promoting the ad-supported tier for Disney+, as it’s still very one-sided.
Another major advantage for the ad-supported tier is that it also offers a cheaper alternative for trying out a new streaming service or a way to watch a show or two, without the full monthly investment. It’s much easier to justify getting the cheapest option for this purpose, than going for the full version, unless you know you will be doing some heavy binge-watching or just hate watching ads.
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Roger has been a Disney fan since he was a kid and this interest has grown over the years. He has visited Disney Parks around the globe and has a vast collection of Disney movies and collectibles. He is the owner of What's On Disney Plus & DisKingdom.