Ad-supported Disney+ launches as company scrambles for profits

by Jacob Fuller


The ad-supported version of the Disney+ service launched Thursday, attracting major advertisers from different sectors, and bringing in new revenue as Walt Disney Co strives to push its streaming business into profitability.

Disney Advertising President Rita Ferro said more than 100 brands, from Mattel Inc to Marriott Hotels & Resorts, are participating in the launch, which Disney has been promoting to marketers and ad buyers since its May.

The company is under pressure to turn a profit on its streaming business, which posted a $1.5 billion loss in the company’s most recent quarter. The losses come amidst backlash over the company’s clear liberal agenda, its highly publicized battle with Florida Gov. Ron DeSantis over his party’s parental rights bill, and two massive box office flops — “Lightyear” and “Strange World” — that feature extended focus on the sexuality of LGBTQ characters.

Box office failure was once rare for the company. With two flops in one year and a streaming service hemorrhaging money by the billions, maybe there is some merit to the saying, “Go woke, go broke.”

Investor unhappiness about deepening losses hammered the company’s stock and helped set the stage for the ouster last month of Chief Executive Bob Chapek, and the return of longtime Disney leader, Bob Iger.

Advertising introduces a second source of revenue for Disney+, to supplement subscription fees. The company’s other streaming services, Hulu and ESPN+, already have commercials.

A $3-a-month price increase also took effect on Dec. 8, bringing the price for the ad-free version of Disney+ to $10.99. Disney+ with ads costs $7.99. Researcher Kantar projects that one out of four Disney+ subscribers could switch to the less-expensive version of the service with advertising.

Chief Financial Officer Christine McCarthy told investors the company does not expect the advertising-supported tier to have a “meaningful impact” until later in its 2023 fiscal year.

As subscriber growth slows in North America, Netflix similarly introduced commercials to bolster revenue and support its estimated $17 billion annual content spend. Other streaming services, such as HBO Max, Paramount+, and Peacock, also offer ad-supported versions of their streaming services, emulating the business model that has long supported the television business.

Ferro told Reuters that Disney+ will carry four minutes of advertising time per hour, in 15 and 30-second spots, and limit the number of times the same ad will appear over the course of a day or week.

“A brand like Starbucks will have no more than one commercial an hour, no more than two a day,” she said. “We’ve asked advertisers for multiple versions of creative. Even if they air two a day, you won’t see the same ad.”

Disney plans to introduce features that will allow advertisers to target consumers by region, gender, and age.

Copyright 2022 Thomson/Reuters. Additions and edits by Jacob Fuller, FISM News.