Disney Eyes Free Streaming to Reach Price-Sensitive Viewers
Disney is exploring a free, ad-supported streaming service to reach price-sensitive consumers and drive subscribers toward its paid offerings. Chief Executive Officer Josh D'Amaro said on the company's quarterly earnings call that Disney is considering launching free channels as a way to expand its reach.
D'Amaro outlined three goals for a potential free offering: expanding reach to consumers who are sensitive to subscription costs, generating additional ad inventory to accelerate ad revenue growth, and funneling new subscribers into Disney's paid streaming services. He noted that unlike many ad-supported competitors, Disney is 'fairly well sold,' meaning more inventory would benefit the company's ad business.
The company has already sold out Super Bowl ad spots for $9 million each, a significant increase from previous years. Chief Financial Officer Hugh Johnston attributed this to high-profile programming such as the College Football National Championship and the Grammys. However, he also noted that softer ad pricing was a drag on revenue across Disney's entertainment segment.
Disney's move into free streaming comes amid growing competition in the market. Fox Corp.'s Tubi accounted for 2.3% of total U.S. television viewing in May, and the Roku Channel drew 3.1%. Netflix co-CEO Greg Peters said a free offering 'could make sense in some markets' but had no near-term plans.
Disney's entertainment streaming business posted revenue of $5.53 billion in the fiscal third quarter, an 11% increase driven by a larger subscriber base, rate increases, and stronger ad sales. The company has stopped disclosing subscriber totals, but its most recent figures put Disney+ at 132 million subscribers and the combined Disney+ and Hulu base at 196 million.