As the streaming giants duke it out looking for extra subscribers in a saturated market, we’ve seen AVOD, or ad-supported streaming solutions, rise up as the chance to carve a few extra subscribers out of tighter budgets. Yet, with Disney’s recent announcements surrounding their tier pricing, it seems we may be seeing the end of the ‘cheap’ ad-supported tiers, too. Brandon Blake, entertainment lawyer with Blake & Wang P.A, dives into this strange decision a little deeper.
Disney+ Price Hikes
Instead of offering any kind of real temptation with their recently-announced ad-supported tier, Disney announced this week that they will be introducing the Disney+ ad-supported tier at the current premium tier cost. The premium tier will see a $3 price hike in December, when the AVOD-tier is due to release.
It’s a symptom of the broader shift from many of the current top streamers to ‘maximizing profitability’, instead of focusing on subscriptions alone. The question now is whether we will see other top-shelf streamers follow in Disney’s footsteps.
Strong Third Quarter Earnings
The announcement was made shortly after Disney, almost alone of the streamers this quarter, posted a very strong earnings report. Unlike many competitors, they’re still showing solid momentum and an uptick in subscriber numbers, finally passing Netflix in number across its bundles.
This near-unique sign of budgetary resilience, coupled with support from their live parks and events, and a recently announced investment in content quality, is being used as the leverage to justify the price hike. Of course, some analysts have been arguing that the Disney+ package is underpriced to start with.
It’s still a fairly abrupt swing from the March announcement, where the AVOD-tier was framed as, “Expanding access to Disney+ to a broader audience at a lower price point is a win for everyone.” It’s also highly representative of the broader swing to profitability concerns over growth for the quarter. This has been somewhat echoed by the markets, which have pulled away from seeing raw subscriber growth as a true benchmark. Instead, some have begun to see it as a ‘placeholder metric’, only relevant before profitability is properly achieved.
This brings Disney into line with the wider trend we’re seeing on trimming content spend and focusing on making less, but better. We’ve recently seen both Netflix and Warner Bros. Discovery make similar promises. With Netflix’s upcoming (and, at least according to some, long overdue) AVOD tier still something of a mystery, and unclarified since their July announcement, speculation on how they will handle the market shift is growing. Netflix is already priced higher than Disney+, which will add some extra intrigue, especially in the current inflationary market.
Alongside the price announcement, Disney promised to take a ‘thoughtful approach’ to how the advertising load is balanced, including measures such as lower advertising loads for bundle subscribers and debut sign-ups.
All in all, it’s an interesting shift in perspective from the initial heyday of AVOD tiers. Will this be the new AVOD trend? For now it’s looking likely indeed.