Disney+ officially launches ad-supported $7.99 tier to push for profitability

Disney+ officially launches ad-supported $7.99 tier to push for profitability

Disney+ (DIS) has officially launched its ad-supported tier.

The new deal – which comes a month after the highly anticipated ad-supported Netflix (NFLX) debut – costs $7.99 per month, $3 less than the ad-free version of Disney+ which now costs $10.99 per month.

“Price hikes are hitting many of the major streaming platforms as the holiday season approaches, so affordable ad-supported tiers like the new Disney+ Basic plan will be appealing to many consumers,” said Kevin Krim, CEO of advertising measurement platform EDO, at Yahoo Finance. .

“Disney+ is currently the fastest growing streaming platform, and the Basic plan offers another step towards profitability,” added Krim.

“I think [the ad tier] moves the needle quite substantially,” Bloomberg Intelligence analyst Geetha Ranganathan told Yahoo Finance, dismissing concerns about a broader slowdown in ad spending. “It’s absolutely very, very critical, and they’re l did at the right time.”

According to a new study by Kantar Research, roughly 1 in 4 current Disney+ subscribers will upgrade to the ad-supported version, which equates to roughly 46 million of the streamer’s 164 million users.

Industry experts argue that offering lower-cost, ad-supported options is still an important protection against churn – something all streamers want to avoid amid increased competition.

On Tuesday, Netflix co-CEO Ted Sarandos said there could be more ad-supported bids for the major streaming service, telling investors at a UBS conference: “We have multiple tiers. today. So it’s likely there will be multiple levels of advertising over time, but nothing to say yet.”

The executive added that Netflix’s level of advertising is likely to change and grow over time, explaining, “The product itself will evolve. I suspect quite dramatically, but slowly and incrementally.”

Netflix’s ad tier, at a competitive price of $6.99 per month, has a few downsides, like the inability to download movies and TV shows. Additionally, due to various licensing restrictions in countries, approximately 10% of global content is not available to ad-tier users.

“Nearly about 90% of viewing is covered by the advertising level today,” Sarandos revealed at Tuesday’s conference call, explaining that this number is expected to slowly increase. “You should expect – [not] full parity, but near parity over time.”

Iger’s turn to profitability

As Disney seeks to capitalize on its publicity streak, recently returned CEO Bob Iger hopes the debut can help dampen adverse investor sentiment as Disney shares have fallen more than 40% since the start of the year.

In its last fiscal year, losses from Disney’s direct-to-consumer unit, which includes Disney+, Hulu and ESPN+, totaled $4 billion for the year.

The streaming division lost $1.5 billion in the company’s latest quarter, missing expectations and sending shares down more than 10% after the results.

Iger, who spoke to employees at a company-wide town hall last week, noted that a strategic shift toward profits is currently underway, revealing that he is currently only no plans to reverse the hiring freeze Bob Chapek put in place earlier this month as he continues to assess Disney. current cost structure.

Executive Chairman of the Walt Disney Company Bob Iger arrives at the world premiere of the film 'The King's Man' at Leicester Square in London, Britain December 6, 2021. REUTERS/Hannah McKay

Executive Chairman of the Walt Disney Company Bob Iger arrives at the world premiere of the film ‘The King’s Man’ at Leicester Square in London, Britain December 6, 2021. REUTERS/Hannah McKay

Alexandra is a senior entertainment and media reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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