Disney+ Set for Major Shift With Possible Free Ad-Supported Tier
As the cost-of-living crisis continues, inflation rises, and people look to save money, we’ve seen a drastic increase in the use of free, ad-supported platforms such as Tubi, Samsung Plus and Roku. Some streaming platforms, like Disney+, offer a limited selection of content available to everyone, while others, like Discovery+, have a free tier to encourage people to continue to use their platforms.
Disney has been licensing some of its films and shows to free platforms like Tubi for a while and has a wide selection of FAST channels available on a variety of different platforms, but recently, it was revealed that Disney was looking to expand the reach of Disney+ to include more content for everyone at no cost.
During a special question-and-answer session at the Goldman Sachs Communacopia + Technology Conference, Disney’s Senior Executive Vice President & Chief Financial Officer, Hugh Johnston, was asked about the integration of FAST (Free Ad-Supported Television) into Disney+, to which Hugh answered:
FAST is another example of, we’ve talked about trying to reach new consumers and broaden our consumer base. There’s obviously a subset of consumers that are more price sensitive, and by virtue of introducing a free channel, it offers us an opportunity to bring those people in, essentially more people going into the top of the funnel. It’s got a couple of other benefits as well, though. If you look at our advertising, unlike most of the AVOD competitors that we have, we pretty well sell out our advertising. We actually need more inventory, and a FAST channel would offer us the opportunity to bring more inventory into our ecosystem. We’re certainly excited about that.
It also represents an opportunity if someone is thinking about churning out, to keep them in the ecosystem by downgrading and offering us the opportunity later to sell and upgrade them back into Disney+, the primary. I have heard a little bit of concern around cannibalization. If you look at ESPN, essentially we have done that for years, managing a free app and then basically selling people up over time, whether it was into Select or now into Unlimited. From that perspective, I think we have got pretty good skills at doing that. I would expect us, because the FAST channel can evolve over time, if we see it cannibalizing or we see it is creating an issue, we can adjust the content to make sure that it does not do that.
We are going to be ads a lot and it is early days on this, but it is certainly something that we are excited about, and I think it is going to be a terrific addition to the portfolio.
Based on Hugh’s comments, it’s clear that the addition of a FAST tier to Disney+ is no longer just an idea that they’re exploring; it looks like it’s going ahead, and it makes complete sense, as while they obviously want more people to be paid subscribers, they will continue to generate additional revenue from advertising from free users.
Churn is the biggest problem for any streaming service, and people are naturally going to do it, so rather than fighting it, making it easier to keep them engaged within the app is the easier way of getting them back.
There’s little doubt that the FAST tier of Disney+ will offer limited access to the library of films and shows available to paid subscribers, but Disney needs to compete with free platforms like Tubi, Roku, Samsung Plus and, more importantly, YouTube and TikTok, so this could be a great option for those with limited incomes.
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