Disney+ is adding an ad-supported tier

Disney+ will soon be available at a lower price — but there’s a catch. Later this year, the streaming service will roll out a new advertising-supported option available for less than its current $8 monthly subscription fee. The move could further bolster its subscriber growth , which briefly slowed in the latter half of 2021, but picked back up in recent months.

The decision is being framed as “a win for everyone — consumers and advertisers,” by Disney executive Kareem Daniel, in a statement accompanying the announcement. But that contradict plans the company articulated last summer.

During the Credit Suisse Communications Conference in June, 2021, Disney CEO Bob Chapek dismissed the idea of introducing an ad-supported option on Disney+. “We’re always reevaluating how we go to market across the world, but we’ve got no such plans now to do that,” said Chapek . “We’re happy with the models that we’ve got.”

As services like HBO Max and Paramount rolled out ad-supported options in 2021, for $10 and $5, respectively, the pressure to compete at lower price points has apparently softened Disney’s stance on advertising.

How Disney+ is modifying its kid-friendly approach to battle Netflix

The timing of Disney’s announcement is particularly aggressive as it prepares to offer the entire slate of Marvel streaming series (Daredevil, Luke Cage, Jessica Jones, Iron Fist, The Defenders, and The Punisher), which were once exclusive to Netflix, on its own platform. Netflix canceled its Marvel shows as of 2019 when its licensing deal with Disney, which owns Marvel, expired. The shows didn’t have a streaming home until Disney’s recent announcement that it would be folding them into its own Disney+ service.

Notably, the violence and sexual content in the former Netflix series are generally more graphic than in Marvel films, which usually avoid R-rated content and are already available on Disney+. Introducing more adult-themed Marvel content to the largely child-friendly confines of Disney+ has prompted the company to announce that it will automatically ask users to update their parental controls when the new Marvel shows come online on March 16.

Previously, Disney customers who wanted more mature content could get it through Hulu, offered as part of a bundle along with ESPN for $14 a month. The addition of new Marvel properties is another indication that Disney+ — which currently doesn’t offer any R-rated or TV-MA content — is inching into the realm of Netflix’s edgier content.

Disney+ is shaping up to be the primary alternative to Netflix

Adding more mature content for a broader audience is part of the reason some analysts are predicting that Disney+ will reach 294 million subscribers by 2026, surpassing Netflix, which is projected to reach 286 million around the same time. Currently, Disney+ has roughly 130 million subscribers compared to Netflix’s 221.8 million.

Aside from lower prices (exact pricing and launch date have yet to be revealed), Disney+ is also hoping to match Netflix by increasing spending on original content. During Disney’s February conference call with analysts and investors, it disclosed that it plans to spend $33 billion on content, including sports rights, in the coming year. At present, Netflix spends $17 billion yearly on its original content initiatives.

So far, Netflix, Apple TV Plus, and Amazon Prime Video haven’t added ad-supported, lower-priced options, but Disney+’s move may now force their hands.

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