Disney is anticipating that over the long term, the majority of Disney+ customers will pick the lower-cost, ad-supported plan, which is set to launch later this year.
“Based on our Hulu experience, we actually have more AVOD [ad-supported video-on-demand] than SVOD [subscription VOD] subscribers,” Disney CFO Christine McCarthy said, speaking Wednesday at the 9th Annual MoffettNathanson Media and Communications Summit. “We expect about the same percentage for both Disney+ and Hulu, just based on the experience curve that we’ve witnessed.”
A few years ago, Hulu revealed that 70% of its viewers were on ad-supported plans with the remainder on the pricier ad-free tiers. McCarthy said Disney+ ad inventory will be sold at a premium, which will “enhance” the average revenue per subscriber it expects to generate. “We really feel good about this opportunity,” she said.
Since announcing plans to roll out Disney+ with ads in March, the company has mostly been mum on details about Disney+ with ads, including the price. The company has said only that it will be less expensive than the ad-free version (currently $7.99/month in the U.S.) and will debut first in the U.S. in late 2022.
Variety reported this week that the ad-supported version of Disney+ will not accept alcohol or political advertising at launch, nor will it run ads from rival streamers or entertainment studios.
At the MoffettNathanson conference, Rita Ferro, president of Disney Advertising Sales, said that the Disney+ ad-supported tier will have an average of four minutes per hour out of the gate — a lighter load than Hulu — confirming the Variety report. Partly that’s because 65% of viewing on Disney+ is movies, which has fewer ad breaks than series, she said.
The Disney+ ad-supported service will start with 15- and 30-second spots, but will expand to a “full suite of ad products” over time, Ferro said. Since the Mouse House announced the ad-supported tier, she said, “The response has been extraordinary” from advertisers and brands.
Regarding kid-targeted ads on Disney+, Ferro said, “Yes, we’re going to have advertising… to kids, but it’s going to be controlled advertising with a lot of parental levers to pull. We’re not going to collect data on that.” She added that there won’t be advertising in preschool content on Disney+ at launch.
Disney+ will be in about 150 markets by the end of 2022, according to McCarthy, following a big international expansion this summer in 42 additional countries and 11 territories across Europe, West Asia and Africa. As of April 2, Disney+ had 137.7 million paying subscribers, up 33% year over year and a gain of 7.9 million in the first three months of 2022.
On Disney’s quarterly earnings call last week, CEO Bob Chapek teased that a full direct-to-consumer ESPN offering is on the road map. “We know that at some point when it’s going to be good for our shareholders, we’ll be able to fully go into an ESPN DTC offering,” he said. “And we fully believe that there is a business model there for us that’s going to enable us to regain growth on ESPN+ in a full DTC expression.” At the MoffettNathanson conference, McCarthy said Disney has no set timeline on introducing a full ESPN streaming service, which would be “a different product” — one that would have a higher price point than the current ESPN+ ($6.99/month).
Meanwhile, the decision about putting projects into theatrical vs. on streaming distribution is “not one size fits all,” McCarthy said at the conference. Today, movies that perform the best at the box office have been action, superhero and adventure titles, she said, citing recent Marvel blockbuster “Doctor Strange in the Multiverse of Madness.” That’s “not necessarily the same for, let’s say, adult dramas,” McCarthy said. “Some of those people say, ‘I’m just fine watching those at home.'”