Disney+ is exploring the idea of a free tier for its streaming service. Disney CEO Josh D’Amaro mentioned the idea during The Walt Disney Company‘s third-quarter earnings call this morning.
While this would be welcome news for fans who may not be able to afford the service, D’Amaro told analysts that the potential free tier would allow Disney+ to “accomplish several goals and hopefully do that more efficiently.”
First, we see it as a way to expand our reach to a customer segment that’s more price sensitive. Expanding our reach is, as we’ve talked about before, one of our strategic priorities. Second, unlike a lot of our AVOD [advertising-based video on demand] competitors, we’re fairly well sold, meaning more inventory would actually help us accelerate our ad revenue growth. And then finally, as you mentioned in your question, a free offering could help us drive top-of-funnel Disney+ subscriber growth. So nothing specific to announce today, but definitely something that we’re considering.
Josh D’Amaro
Disney+ Free Tier Benefits
The benefits for the consumer are simple: it allows free access to watch the biggest titles from the biggest brand in the world. For the company, it is to entice consumers who are not subscribed to subscribe and to have them introduced to their vast content from their various film and television studios.
As streamers like Netflix and Peacock continue to raise prices, consumers are looking for the most affordable content. The free tier would be expected to help generate additional advertising revenue, and yes, that means the free tier would be ad-supported, but that is still better than not being subscribed at all.
Downsides?
While I do not believe there are many downsides, one could say this is a sign of how much Disney is hurting in the streaming game. Disney makes more money selling Lightning McQueen merch than Disney+ makes annually. It is also a sign that Disney is moving into the quicker streaming verticals like YouTube or DailyMotion; you could even point to the recent TikTok partnership Disney entered into. Now, while this has yet to be confirmed by me, the idea of a Disney+ tier has been floated around for months now, and the one potential downside for the consumer would be rotating content, which means some titles may not be available on the free tier, whether that is exclusive content like Daredevil: Brand New Day or new releases like the live-action Moana, I am not sure.
My Thoughts
What I will say is that while it may look like Disney is moving away from exclusive content on Disney+, such as the slowdown on MCU or the Star Wars shows, I was told by sources that the idea is for exclusive content in the form of films and series to continue to be developed for the streamer and that the MCU, Star Wars, Pixar, and possible another popular Lucasfilm IP that people may know and love are included.
The free tier is a major incentive to grow the streamer’s subscriber base; a bigger subscriber base means more eyes on the content, and the more eyes on the content, the more new content Disney can produce.
I should also mention that Disney+ has been the saving grace for some of their theatrical films; for example, Disney’s live-action The Little Mermaid grossed a little over $560 million at the worldwide box office on a $250 million budget and was able to break even. Well, when you include its release on Disney+, the film was able to make a profit for the studio. Other examples of this are Encanto and Elemental. The company knows a free tier can only help, not hurt, their brand, and I am all for it.
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