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Disney+ to add an ad-based tier

Last month, Disney announced that it plans to add an ad-supported tier to its Disney+ streaming service later this year. There’s no word on how much cheaper it’ll be than the current ad-free service, which costs $8/month or $80/year.

Disney, Disney Channel, and ads

Disney Channel Canada with Raven's Home
Disney Channel (Canada)’s main page. (Disney / screenshot by author)

Disney and advertising on its TV services have an interesting relationship. Specifically, Disney+’s direct predecessor: the Disney Channel.

When the Disney Channel launched in 1983, it was as a pay TV service, just like HBO and Showtime. However, a 1997 revamp saw the Disney Channel shift permanently to being a basic cable channel.

With the shift, the Disney Channel started airing in-show breaks. However, instead of running commercials for toys, cereal, and so forth (like Nickelodeon and Cartoon Network), Disney opted to run promos for other Disney Channel shows, plus current Disney movies. The Disney Channel has kept this policy up to this day. Ironically, this also gives the Disney Channel more similarities to the noncommercial PBS Kids (which runs similar promos for other PBS Kids shows between programs) than Nick or Cartoon Network.

Pros of Disney+ ads

Disney’s interested in an ad supported tier as a way to boost subscriber numbers, with an ambitious goal of 230-260 million subscribers by 2024. A cheaper ad-supported tier might draw in more customers.

Disney already offers Hulu and ESPN+, which both carry ads, though an ad-free version of Hulu exists. Hulu costs $7/mo. with ads, or $13/mo. without. Disney also offers all three services as both an ad-based bundle (at $14/mo.) and as an ad-free-Hulu bundle (at $20/mo.).

Ads also are a way for companies to pull in more revenue, possibly eclipsing even what ad-free subscriptions might earn. For example, Pluto TV is an ad-supported free streaming service, and earned Paramount $1 billion in revenue in 2021. The ad-supported tier of Paramount+ is also earning Paramount some revenue.

Finally, a cheaper ad-backed tier might save subscribers some money, if they’re willing to tolerate ads. The cost of streaming services is going up, with Netflix now costing $15.50 a month for the average user. If streaming’s future, so is making these services affordable, and/or offering something with the service that makes it worth the cost.

Cons of Disney+ ads

Disney+ without ads is familiar territory to longtime Disney Channel viewers. Adding commercials as a cheaper tier for non-Disney products might feel odd.

There’s also concerns about commercialization of kids’ TV, which ad-free streaming services offer a way of escaping. To a point anyway—they’re still commercial media companies, and Disney in particular has monetizing childhood down pat.

Disney+ with an ad-based tier also implies another price hike for the ad-free version of Disney+, to set the two apart. That said, its current price is fairly inexpensive for what it’s offering.

I also note Disney’s goal of 230-260 million subscribers sounds awfully high. Granted, in Disney+’s short lifespan, it’s grown to become the world’s third most popular streaming service, behind Netflix (with 221.8 million users) and Amazon Prime Video (with 175 million users).

Finally… they’re still commercials. Which, well, aren’t universally popular; otherwise, ad blockers in browsers wouldn’t exist.

The future of Hulu?

"The Bravest Knight" on Hulu
“The Bravest Knight” on Hulu. (Hulu / screenshot by author)

Adding ads to Disney+ also calls into question what Hulu’s long-term future looks like. Disney+ has made some recent changes that put it more in line with the international versions (which carry the Hulu-like Star category of adult programming). Said changes include emphasizing parental controls and adding TV-MA material (the Netflix Marvel shows).

Hulu is still considered a catch-all service, but that’s declining with WarnerMedia, Comcast, and others starting their own services. Also, at 45.3 million subscribers, Hulu has more users than Paramount+ and Peacock, but way fewer than HBO Max.

On the other hand, Hulu is one of the oldest and longest-lasting streaming services in the US. Besides Hulu’s brand value, there’s also its heavy integration into anything capable of running a streaming app. Hulu’s also often promoted in stand-alone deals. These include discounts for college students, as well as bundled with another service (Showtime, Spotify, the Disney+ bundle, etc.). There’s also the Hulu Live TV streaming service, a cable replacement service on par with YouTube TV and FuboTV.

Other services’ ad-based tiers

Ad-supported streaming services can also be hit-and-miss in quality. I use ESPN+ plenty during hockey season, but the service’s current constant ads for LeBron James promoting cryptocurrency are tiresome. Paramount+ with ads, meanwhile, sticks a minute or 90-second-long ad break at the start and in the middle of some of their Nickelodeon shows, as well as after the show’s over.

HBO Max also comes with an ad-based tier. As of this writing, I haven’t tried it yet, but $10/mo. isn’t much of a discount from its usual cost of $15/mo. $10 is also what the ad-free tiers of competing services Paramount+ and Peacock cost. That said, HBO Max’s prices are a byproduct of it being the existing HBO cable channel/on demand service with Warner’s back catalog of TV shows and cartoons bolted on?

As for Netflix, they’ve mostly resisted the idea of an ad-based tier in the past. However, one of their executives expressed some interest recently in the idea. An interesting possibility, given Netflix is now the most expensive streaming service.

Image from Disney+. (Disney)

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