Disney is set to release a new, cheaper subscription option for their Disney+ streaming service that will include commercials. The current ad-free version of the service will still be available at a slightly higher price point. No specific costs have been announced yet, but both plans are set to launch later this year.
As streaming services become more popular, many companies are offering lower-tiered versions with commercials. This is because streaming is quite expensive to sustain – you have to pay for content, delivery infrastructure needs to be updated regularly, and there are other associated costs. So it’s no wonder that companies are looking for ways to finance their streaming platforms for the long haul.
What was most interesting to me was the methodology Disney used in deciding that this was the best move to make. Their reasoning was based on Hulu’s success. According to Disney’s CFO Christine McCarthy, 70% of viewers are on ad supported plans and based on our Hulu experience we expect the same percentage for Disney Plus.
When you have multiple brands differentiating them is vital to their success. Thinking Hulu’s subscription service would yield similar results for Disney Plus illustrates a lack of understanding of what makes Hulu unique. Offering live TV, special programs like sporting events, and a wide variety of movies and shows, Hulu has something for everyone; this is what makes their service work for 70% who value the ad supported tier. However this may not translate with viewers who like to binge watch their favorite shows like Mandalorian, Loki, Boba Fett, Bad Batch and other Disney Plus programming.
Disney owns many different businesses, each with its own unique culture and audience. What works for Pixar will not necessarily work for Lucas film, and vice versa. Therefore, it is crucial that decisions are made using the best methodology possible in order to avoid costly mistakes that could lead to job losses.