When Disney announced earlier this month that it would debut a cheaper ad-supported tier to its streaming service in the US before the end of the year, Rita Ferro, Disney’s president of advertising sales and partnerships, said advertisers had long been “clamoring” for the chance to be on the platform.
She wasn’t kidding, media buyers told Marketing Brew. The forthcoming ad-supported tier is a victory for the advertising community that has been pushing for more streaming ad inventory from Disney, and the timing of the new tier is also sure to shake up upfronts planning as clients review their budgets and look to earmark budgets for Disney+.
“It’s something the market has been asking for since Disney+ launched: Will there be an ad-supported service offering?” Cristina Ferruggiari, EVP, advanced TV at Lockard & Wechsler Direct, told Marketing Brew. “Knowing that a good majority of their business is ad-supported, it did feel there was an opportunity for its transition to a lower-cost ad-supported model.”
Finally!
Buyers have been pushing for an ad-supported option since even before Disney+ debuted in November 2019 with no advertising, Cara Lewis, the chief investment officer at Dentsu International, told Marketing Brew. In the absence of an ad-supported tier, brands have relied on product placements and brand integrations to get in front of Disney+ viewers.
“What we’ve been trying to do from them being non-ad-supported is integrate into content where we can,” Lewis explained.
The ad-supported tier will give other advertisers a chance to get in on the action as well, especially direct-response marketers. “There’s [an] opportunity for us as performance marketers to play in that space and test,” Ferruggiari said.
While Disney has remained light on the details of the forthcoming tier, advertisers should be ready for a light ad load, as well as a potentially different ad experience than some other platforms on the market, SEVP and CFO of the Walt Disney Company Christine McCarthy hinted at last week.
“It will be a different ad-supported platform than a lot of others out there just because the nature of the service we’re providing is a family-oriented one,” McCarthy told investors at the Morgan Stanley Technology, Media and Telecom Conference. “...We’re going to be very thoughtful and mindful about what it is we’re putting on in advertising and how much of it. We will be able to curate advertising that we believe is good for the Disney+ service.”
Perfect timing
The announcement of the ad-supported tier comes ahead of this year’s upfronts, which McCarthy said was intentional. Since the forthcoming ad-supported tier isn’t tested, brands may need to ask themselves how much risk they are willing to take.
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However, marketers say the growth of Disney+’s ad-free tier is a useful proof point to plan around. “There’s obviously [a] risk always in being the first one in something that’s unknown,” Ferruggiari said. “I think in the case of Disney, they have a proven product, a proven model that’s grown, so you feel a little bit more comfortable.”
While buyers expect the new tier to give Disney a leg up during upfronts, advertisers might start by reallocating dollars within Disney.
“We’ll look first to probably move within the Disney portfolio to see what we can do there and obviously support the product, because I do think it’s a viable option,” Lewis said.
Who’s next?
Since its November 2019 debut, Disney+ has grown to 129.8 million total subscribers, with 42.9 million of them coming from the US and Canada. The company says the ad-supported tier will help it deliver on its goal to reach between 230 million and 260 million subscribers by fiscal year 2024, but it remains to be seen how many existing subscribers will opt for the ad-supported tier compared to new sign-ups attracted to the lower price point; at Disney+ sister streamer Hulu, the majority of its 45 million subscribers choose the ad-supported plan, McCarthy has previously said.
As Disney+ readies its ads, buyers say they’re once again wondering whether Netflix, the biggest streamer on the market that has long eschewed ads, will budge. “Obviously we’re in the business to buy ads for our clients,” Lewis said, “so we want to try to be everywhere that we possibly can.”
To that, Netflix chief financial officer Spence Neumann may have given buyers a little hope. “It’s not like we have [a] religion against advertising, to be clear,” Neumann told investors at the Morgan Stanley Technology, Media & Telecom conference last week, even though he confirmed that ads were not on the immediate horizon. “It’s not in our plans, but other folks are learning from it, so it’s hard for us to ignore that others are doing it.”