Last December, Disney+ launched a brand new ad-supported tier in the United States and increased the non-ad-supported tier by 38%, $3 a month, which, as you might expect, didn’t go down well with subscribers on social media.
However, according to the Wall Street Journal, the price rise didn’t have much impact on amount of subscribers and while Disney expected more subscribers to move to its cheaper ad-supported tier, 94% of existing subscribers stayed in the higher price point tier, according to new data from subscription-analytics firm Antenna.
Recently, Disney CEO Bob Iger spoke at a Morgan Stanley conference and shared some insights into the pricing of Disney+, hinting that the price might go up even more.
Well, first of all, I’m generally bullish on streaming as a great consumer proposition, as a really robust platform to deliver high quality content under easily used circumstances. And I am extremely bullish on some of our streaming prospects, notably Disney+, which grew to just such an — at such a meteoric rate. And I think the reason it grew is the strength of the content, those brands that occupy that space. We know in terms of delivering profitability and growth to that platform, that we have to better rationalize our costs. Obviously, we have to attract more subs. But I think one of the key things that we have to figure out is a pricing strategy that makes sense.
I think, in our zeal to grow global subs, I think we were off in terms of that pricing strategy. And we’re now starting to learn more about it, and to adjust accordingly. And when you think about streaming in general, it’s a consumers delight in the sense that we used to talk often when it came to linear programming about à la carte, it’s the ultimate à la carte proposition for the consumer. And while I’m pro consumer, generally, I think we have to take a look at how easy it is for the consumer to not just sign on, but sign on sometimes under promotional circumstances where it’s not only less expensive, in some cases, it’s free, and the signing you get for three months, you get one month free, watch all you want in a month, so sign off that and go to another one that’s doing the same thing. So, I think we have a lot of rationalization to do from a pricing perspective. But, that’s one path to profitability, another is we do have to grow subs. A third is basically coming to grips with rising costs of production, and also figuring out just how much volume we need for that platform.
The who — and then I don’t know whether you’re going to get specific about who but that’s a different set of circumstances.
Disney declined to comment to Antenna about these numbers, but if so many people decided to stay at the higher price, it shows how subscribers weren’t swayed to save money by getting ads. This is very different to Hulu, where the vast majority of subscribers are on an ad-supported tier.
But the good news for Disney+, is, according to consumer-spending data from thousands of U.S. consumers, the new ad-supported tier had grown much faster in the first three months than the ad-supported tiers for Netflix and HBO Max.
In January 2023, 20% of new subscribers took out the ad-supported tier, while that increased to 36% in February 2023, showing there is a demand for the ad-supported option. Compared to Netflix’s ad-supported tier, it broke down to 9% of new sign-ups in November 2022, 15% in December 2022 and 19% in January 2023. And when compared to HBO in the first three months of operating, it worked out at 14% for June 2021, 16% in July and 21% in August.
Jonathan Carson, CEO and co-founder of Antenna said:
“Disney+ launched the ad-supported product like an entertainment company. Netflix launched it like a tech company. With Netflix, it was a limited release, only on one of the plans, and you kind of had to search to find it. Tech companies classically release small, do a lot of testing, iterate, and then hit the gas if successful. Disney+ had some more sizzle, a bigger bang, It was more heavily featured, available in more product configurations, and they’re also seeing faster pickup.”
Last year, Disney announced it would be rolling out the ad-supported tier internationally in 2023, however, no more has been announced on that plan since last summer. Adding in an ad-supported tier would obviously increase revenue in new signups.
When compared to other streaming services, it’s clear Disney+ has been able to get more signups for its ad-supported tier, but also maintain a majority of existing subscribers with the price rise. However, with Disney cutting back on how many new originals it’s making, reducing its general entertainment roll-out, and offering much less each month than before, will subscribers stick around long term? Especially when those annual renewals come around!
Did you take out the ad-supported tier or keep it at the ad-free tier? Let us know on social media!
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.