Disney+ is launching an ad subscription, but it won’t be cheaper

by James · December 7, 2022

Recently reinstated Disney CEO Bob Iger rang the opening bell at the New York Stock Exchange.

Iger is back in the house of the mouse.

Millions of US Disney+ subscribers will be able to pay the same price for an ad-free streaming experience as the platform introduces a change to its subscription plans.

Starting Thursday (Dec. 8), the ad-free experience will increase to $10.99 a month from the current price tag of $7.99, the cost of the ad-supported subscription.

Disney’s decision to introduce a new ad-supported payment tier for its popular streaming service follows the lead of rival Netflix, which launched its own ad-supported plan in November.

The move comes after a turbulent year for Disney, in which longtime CEO Bob Iger was reinstated in November after the company posted a third-quarter loss. Disney’s direct-to-consumer division suffered in particular, posting a $1.5 billion loss even as subscription numbers increased. Iger has prioritized increasing profit margins for Disney+, arguing that the company should cut production costs.

The cost of Disney+’s ad-supported tier subscription is in line with most other streaming services, such as HBOMax, Peacock and Netflix, which all offer ad-supported streaming plans for under $10 a month. This market shift towards more diversified sources of income comes after stagnant subscriber growth in the industry. While Iger looks to right the ship and aggressively increase profits, expect more changes in store for the future of Disney+.

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Mapped: the streaming market’s most powerful players

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Important dates in the rise of streaming platforms

September 2008: Amazon debuts Amazon Video on Demand, an online streaming service that would eventually become Prime Video. Amazon Studios, the in-house production company responsible for original content, was launched two years later.

March 2008: Hulu is founded, with AOL, NBC Universal, MSN, Myspace and Yahoo! as first distribution partners.

January 2009: Netflix, a DVD-by-mail service, is introducing online streaming for a limited number of movies and TV shows.

February 2010: HBO is launching an online streaming service for its cable subscribers to watch content on their laptops and mobile devices called HBO Go.

November 2019: Disney is launching Disney+, a streaming service that will combine Disney, Pixar, Marvel, Star Wars and National Geographic catalogs. In addition, Disney acquired 21st Century Fox, giving it a 60% stake in Hulu.

November 2019: Apple unveils Apple TV+ streaming app. Like Disney+, Apple TV+ only releases original content.

July 2020: NBCUniversal is launching Peacock, featuring content from NBC Studios, while HBO GO transitioned to HBO Max, showing original movies and series as well as third-party content.

January 2021: Netflix reaches 200 million subscribers, consolidating its position as the most popular streaming service.

March 2022: Apple TV+ becomes the first streaming service to win Best Picture at the Oscars, with the original film Coda took top honors at the Oscars.

Quotable:

“Spending money leaving everything in the service of building sub-numbers is, in our view, deeply wrong.” —Warner Bros. Discovery CEO David Zasalv, in an earnings call after a net loss of $2.8 billion in the last fiscal quarter.

Streaming habits, by the numbers:

23%: How many Disney+ subscribers are expected to opt for the cheaper, ad-supported plan
5 hours: The average American spends 4 hours and 49 minutes watching streaming video each day
87%: Number of US households that subscribe to video streaming services

All eyes on Netflix

Netflix just started rolling out its first ad-supported tier in November, but it doesn’t plan to stop there. According to CEO Ted Sarandos, several new payment tiers are in development as the company aims to increase revenue amid increased competition. Currently, Netflix charges $6.99 for a basic plan with ads and $9.99 for an ad-free plan. There are also more expensive plans with the possibility of simultaneous streaming on several devices.

As monthly fees fluctuate, Netflix hopes that its continued investment in premium content will keep its subscriber base stable, as well as stimulate new subscribers in developing markets globally. Season four of the 80s theme Stranger Things became the second Netflix show to surpass one billion hours streamed, and the platform has also recently achieved success with surprise hits Wednesday, an Addams Family spin-off, which is on track to become the third most-streamed series in Netflix history. In addition, the company hopes to build on the buzz with the much-anticipated Harry and Meghana 6-part docuseries about the couple produced by the Duke and Duchess of Sussex themselves which premieres on Thursday (December 8).

Despite a recent stumble in revenue, Netflix has consistently been the most profitable streaming service. After recording subscriber losses in the first half of 2022, the company still managed to beat revenue expectations.

Now that streaming services have become a fixture in the homes of millions of Americans, the question of profitability will take center stage. This likely means price increases across the industry, more ads, less money spent on original programming and, for competitors, trying to catch up to Netflix.