May 18, 2022
With Disney planning to launch a less-expensive, ad-supported subscription option for Disney+ later this year, questions about the pending plan featured prominently May 18 for Disney CFO Christine McCarthy and Rita Ferro, president of Disney advertising sales and partnerships, at the MoffettNathanson Annual Media & Communications Summit.
With Disney expecting to operate its branded SVOD platform in 150 markets by the yearend, McCarthy reiterated management confidence that Disney+ could reach 230 million to 260 million global subscribers by the end of fiscal-year 2024. The service ended the most-recent quarter with almost 138 million subs — up from nearly 104 million subs in the previous-year period.
“We still expect a strong second half  of subscribers, because we have two things going on: We have a lot of great content coming [to the platform] … and we were also launching in several new international markets,” McCarthy said.
Ferro, who has been tasked with mining incremental revenue from pending Disney+ ad-supported subscribers, said the company internally has been strategizing about an ad-supported option since the SVOD platform launched in late 2019. To help sort through the challenges of an ad-supported plan, Ferro said the company looked no further than Hulu, which Disney owns and operates, with Comcast as a minority stake holder.
“Hulu was the first … AVOD platform. They had 14 years’ experience in this space,” Ferro said. “Since we took operational control of Hulu, we’ve doubled the ad revenue, [and] we’ve doubled the number of advertisers.”
Hulu ended the fiscal period with 41.4 million SVOD subs, of which upwards of 66% subscribe to the ad-supported $6.99 monthly plan, with the rest opting for the $12.99 ad-free plan, according to Ferro.
Disney has not disclosed pricing for the ad-supported Disney+ option.
“We expect about the same percentage [of ad-supported subs] for both Disney+ and Hulu, just based on the experience curve that we’ve witnessed,” Ferro said. “We do expect there to be a premium from that [Disney+] advertising that will enhance the [average revenue per user]. So, we feel really feel good about this opportunity.”
Ferro said the Disney+ ad-supported plan would include about four minutes of commercials per hour (which is less than on Hulu) and include children’s programming, although the user data among that demo would not be collected, unlike other age groups. Targeted ads would differ between episodic content and feature-length movies.
“We know that the movies are the reasons people come to the platform and movies have a different ad load … and different ad breaks,” Ferro said. “We want to start slow, and so we’re not going to just start with 15-second and 30-second spots, but we’ll evolve to a full suite of ad products as we learn and understand how people come online and use the platform.”