Launch of Disney+ ad tier will cause 1 in 4 subscribers to downgrade – deadline
When Disney launches the ad-supported tier of Disney+ later this week, about a quarter of current US subscribers are expected to opt for the cheaper, ad-supported version, according to new research from Kantar.
The firm, which conducted an online survey of streaming subscribers in the US from September 5 to 24, found that about 23% of them would choose the cheaper Disney+. About 46 million of the global number of 164 million Disney+ subscribers are in the United States. Starting Thursday, the price of Disney+ as a standalone will rise to $10.99 a month when the new ad-supported plan starts at $7.99. The prices of Disney+ as well as Hulu and ESPN+ will all continue to be discounted via the Disney package.
Disney executives have said they believe the new version of Disney+ will enable them to attract new subscribers who may be more price-sensitive, as well as keep existing customers in the fold. The decision to jump into streaming was made while Bob Chapek was CEO and his key lieutenant, Kareem Daniel, oversaw the streaming strategy. Both were ousted last month, and former longtime CEO Bob Iger has returned to lead the company, with wringing more profit from streaming high on the priority list. Netflix last month made a similar move, launching its own $7-a-month ad-supported version. Executives at Netflix have steadfastly maintained that they don’t expect a significant number of subscribers to trade down to their cheaper tier. (Kantar research has shown a percentage for Netflix subscribers comparable to the figure for Disney.)
Kantar data for the third quarter, which ended September 30, found that Disney+ again over-indexed in “stacked” streaming viewers, meaning those who subscribe to multiple outlets. In the quarter, Kantar found that Disney’s “churn” rate, meaning the percentage of subscribers who canceled, fell from 9% in the previous quarter to 6%. Had the cheaper, ad-supported plan existed, the 23% of subscribers who said they would switch to it would have reduced the overall churn rate even more.
The move to ad streaming could open up Disney+ to new viewers and subscribers who might not have been drawn to it when it launched in November 2019. Over the past three years, Disney has opened up its programming, adding live- events such as Dancing with the stars and non-franchise fare like Peter Jackson’s multi-part Beatles documentary Returned. The Kantar survey found that Disney+ had an 8% share of total screen time among viewers who regularly watch ad-supported video-on-demand (AVOD) programming. Another potential advantage for Disney is that AVOD viewers are slightly younger than the average streaming viewer and are also more likely to have young families.
Growth in the streaming space favors offerings that combine ad-free and AVOD or even free, ad-supported (FAST) options. Of the latest crop of multi-billion-dollar challengers to Netflix, only Apple TV+ remains limited to an ad-free plan, and after three years on the market, the tech giant recently phased in a steep price hike.