Looming Disney+ AVOD Offering a 'Building Block' to Subscriber Goal: Disney

Disney’s announcement Friday that it’s adding an ad-supported Disney+ VOD service in the U.S. late this year -- and internationally in 2023 -- shows “they no longer believe they can hit their 2024 subscriber goals without an ad-supported Disney+ tier,” Lightshed analyst Richard Greenfield wrote investors Friday. Disney called the AVOD offering a “building block” in its path to achieving a long-term target of 230 million-260 million Disney+ subscribers by fiscal year 2024. It ended Q1 FY 2022, ended Jan. 1, with 196.4 million subscribers, 42.9 million domestic. “Expanding access to Disney+ to a broader audience at a lower price point is a win for everyone -- consumers, advertisers, and our storytellers,” said Kareem Daniel, chairman-Disney Media and Entertainment Distribution. Details and pricing will be announced later, Disney said. Offering a lower priced subscription streaming service, supplemented with ads, can expand a subscription-based VOD service’s total addressable market, Greenfield said, but "the far larger question is whether it is the ‘right’ long-term strategic decision in the intensifying war for time and attention." Greenfield cited data from Antenna showing 32% of SVOD sign-ups last year were for ad-supported tiers, up from 19% in 2020, but he noted AVOD tiers have 50%-70% of subscriber bases for services with hybrid ad-supported tiers. “The clear implication is that if you give consumers the option to save money with a lower-cost ad-supported tier, the majority will take that option,” said the analyst. Greenfield said Disney's move could make tech platforms that don’t offer an ad-based tier -- Netflix, Amazon Prime Video and Apple TV+ -- “that much more compelling.” Disney+ is “already low-priced” at $7.99 with a “robust” content slate coming in second-half 2022 and 2023, he said, adding, “Disney has added WAY more subscribers than anyone thought possible when it launched in 2019.”