- Netflix and Disney are launching dueling ad-supported streaming tiers in November and December, respectively.
- Disney’s lower price for ads and established sales team are pluses with advertisers.
- The big question is how large Disney’s audience for its ad-supported tier, Disney+ Basic, will be.
Netflix is making a lot of noise around Hollywood and on Madison Avenue with its upcoming ad-supported tier, but Disney’s pitch is landing stronger with advertisers.
Netflix is scrambling to launch its ads tier in November, which some ad buyers saw as a move to beat the Walt Disney Co.’s Dec. 8 rollout of Disney+ Basic. And while Netflix had advertisers squawking at its terms — a $60-plus price tag to reach 1,000 viewers and a $20 million commitment, with little to no targeting or measurement to start — Disney is seeking a $50 CPM and a $2 million commitment for Basic, said two ad buyers who heard its pitch.
To be sure, many initial commitments to Disney+ Basic were negotiated as part of the larger TV upfront deals and ranged based on agencies’ total spend.
Disney is also taking a low-key approach with its ads to avoid turning off users. Previous reports have had Disney limiting ads to an average of 4 minutes per hour, on par with Netflix and less than traditional TV and some other streamers, including Disney-controlled Hulu. Advertisers are sensitive to viewers seeing their ad repeatedly, and according to a Disney sales deck viewed by Insider, the ads will be capped at one per hour and two per day.
Certain ad categories like liquor and sports betting won’t be allowed and Disney also doesn’t plan to show ads in kid-directed content, at least not initially.
Disney already has a well established sales team, but Netflix is building an internal team from scratch (albeit under two seasoned ad vets, Peter Naylor and Jeremi Gorman) while its partner Microsoft has been leading the sales push. If Disney+ Basic underdelivers for advertisers, those buyers also have the assurance that Disney can fill the gaps with other parts of its video business.
“Netflix got the jump in terms of launch date, but Disney has an infrastructure that’s been in place for some time,” said Brad Stockton, SVP, US National Video Innovation at Dentsu. “They have the legacy of being an ads-supported organization. So they have an ad infrastructure built in, IP for all their shows.”
A Netflix spokesperson shared a statement saying: “We are still in the early days of deciding how to launch a lower priced, ad supported tier and no decisions have been made. So this is all just speculation at this point.” Disney declined to comment on pricing.
Disney CEO Bob Chapek recently hinted at eventually creating a bundle of its streaming services, which include ESPN+ in addition to Disney+ and Hulu. That would require Disney’s taking full control of Hulu; starting in 2024, it has the right to force Comcast to sell its one-third stake, and Comcast can force Disney to purchase its stake.
For now, Disney has a single ad sales team, under ads chief Rita Ferro, selling both family-focused Disney+ and general entertainment-oriented Hulu, which appeals to advertisers that want to deal with fewer salespeople who are knowledgeable of all the offerings.
At the same time, Disney is talking about its Disney+ audience differently from Hulu’s, emphasizing the attentiveness of the Disney+ viewer and the platform’s unique programming.
“If you want to be next to ‘Star Wars,’ that’s the only place to find this content,” Stockton said.
Disney+ Basic’s potential audience remains a big unknown
Disney isn’t sharing subscriber projections for the ad-supported tier. It’s raising the monthly price for ad-free Disney+ to $11 come December; subscribers who want to continue to pay $8 by signing up for Disney+ Basic will have to opt in, an extra step that could limit the audience size. “That will determine how big the ad-supported usership is. So that’s the biggest question,” said Dave Campanelli, EVP and chief investment officer at Horizon.
Advertisers also want to be able to target audiences in advanced ways and own franchises like “Star Wars,” which Disney isn’t offering at the start.
Disney+ has 152 million subscribers, including 45 million in the US, with a goal of hitting up to 165 million by the end of 2024. Netflix has 221 million subscribers globally and saw subscriber losses for the first time in its history in the first two quarters of 2022.
Both Disney+ Basic and Netflix’s ad-supported tier will enter an increasingly crowded marketplace for streaming ads. The new services also come as the economy has softened, causing advertisers to pull back spending — a factor that could cut both ways: Some consumers may opt in to cheaper ad-supported offerings, others may cancel subscriptions entirely.
Still, ad spending on connected TV has exploded in recent years, and any new place to buy streaming ads are being welcomed by advertisers, who are running out of places to spend video ad dollars as viewers shift from traditional TV to streaming services, where ads have been fewer or nonexistent.