The Walt Disney Company introduced its Disney+ Basic subscription plan for Disney+ in the U.S. this week – a lower-priced subscription tier that comes with advertising. The ad-supported tier costs $7.99 rather than $10.99 per month (or $109.99/year) and has only a modest reduction in features. Downloads, GroupWatch, SharePlay and Dolby Atmos are all missing at launch, but consumers do get access to the full Disney+ catalogue, up to seven personal profiles per account, streaming on up to four devices simultaneously, 4K/UHD titles and, among other video formats, Expanded Aspect Ratio with IMAX Enhanced.
Disney is no stranger to advertising, so this is not the kind of strategic pivot we saw from Netflix in November when ‘Netflix Basic with Adverts’ was introduced after a lifetime aversion to advertising support. Disney+ with advertising should be viewed as part of a big advertising picture, with the Disney+ Basic consumers rolled into a scaled audience offer that spans linear broadcast TV, multiple streaming touchpoints and even social media feeds, sold through a unified team who specialise according to category and business type rather than which screen or platform the ads appear on.
Not surprisingly, given their advertising sales heritage and the premium environment of Disney+, the ad-supported tier attracted 100 advertising partners at launch including all the major agency holding companies like GroupM, Dentsu, Havas, Publicis, IPG, Horizon, Omnicom Group, RPA and Stagwell. Hundreds of creatives covering products and services across retail, apparel, autos, financial services, restaurants, technology, telecom, CPG and travel are being shown to consumers.
Speaking at The Future of TV Advertising Global last week, Rita Ferro, President, Advertising at Disney, inferred that there was a certain inevitability to Disney adopting a hybrid model for Disney+, as she emphasised how Disney has always believed in customer choice and wanted as many people as possible to enjoy the product. Hulu already uses this hybrid model successfully, with ad-supported and ad-free tiers.
Asked what differentiates Disney in ad-supported streaming, Ferro pointed to its experience in that marketplace (especially with Hulu) and therefore an understanding of both consumer behaviour (including correct ad loads) and the technology needed “to drive scale and connect brands with consumers”. Beyond content and environment, she also pointed to a unified ‘Disney ID graph’. Built inhouse, this identifies consumers (in a privacy compliant manner) as a basis for audience segmentation, including advertiser/Disney data matching. There has also been a focus on automation, including a self-service platform for buyers.
Disney is also helping to pioneer cross-platform measurement, working with agencies and advertisers to harness new (alternative) measurement solutions to show de-duplicated reach and frequency across the whole Disney television and streaming portfolio. Like a handful of leading media owners, the company has bought into the idea that no single measurement entity has all the answers in an increasingly fragmented viewing landscape, and it is working with no less than 100 vendors today on this next-generation approach.
She also explained how the unified sales teams would draw upon the exact tools needed for a client, product type or category, with pharmaceuticals and retail being different propositions, for example. So, that could mean different mixes from the automation, measurement, attribution, insights and creative cupboards.
One thing that Disney has in common with Netflix as a new SAVOD (Subscription with Advertising VOD service) is lots of exclusive content. The company has been more assertive than most ‘legacy’ studio/channel groups in repatriating content it owns, putting it behind the Disney+ wall as existing licensing deals run out rather than continuing to license it to third-party streamers.
Disney+ is one of the most successful streaming launches of all time, gaining 164 million paid subscribers (so excluding any free trials) by October this year. After a November 2019 launch, the growth trajectory was boosted by lockdowns, but as with all streamers, Disney+ must now grow in the face of what analysts have called an attention recession (now the lockdown stay-at-home viewing is no longer a factor) and a cost-of-living crisis that is forcing consumers to make tough spending choices.
There is also increasing competition in premium streaming. Other studios are improving their game (e.g., Paramount+ from Paramount) and national broadcasters are doubling down on digital (e.g., ITV has nearly four times as much content in its new streaming service ITVX compared to its predecessor ITV Hub, and is putting some of its best drama into ITVX months ahead of their broadcast debuts).
Disney+ subscriber growth was still healthy even ahead of the ad-supported offer, with the U.S. and Canada clocking 20% growth for paid subs (so excluding any free trials) last year (October 2021 to October 2022). The figure for international excluding India was 57% and there was subscriber growth of 42% for the Disney+ Hotstar collaboration in India. Domestic ARPU for Disney+ did fall slightly in this period.
The Walt Disney Company owns ABC (the American broadcast network giant), one of the world’s major sports broadcasters and streamers in ESPN and ESPN+, and Hulu, which pioneered multichannel streamed VOD/linear aggregation, and the company is now a direct-to-consumer giant, with 235 million D2C customers in total (including the 164 million for Disney+). Revenue streams show the direction of travel: D2C earned Disney £19.6 billion to the year ending October 2022 compared to $28.3 billion for linear networks and $8.1 billion for content sales and licensing.
Those D2C revenues are up 20% year-on-year versus linear revenue growth of 1% (and content sales/licensing growth of 11%). The company expects Disney+ to hit profitability in 2024.
