The "streaming wars," just got a little more dynamic. With the biggest Participants in the game, they must alter strategies, use different tactics, zig when an opponent zags, or come up with something completely new to gain an edge over the competition. And one of the most recent and innovative significant changes has emerged from one of the leaders in the streaming sphere. Disney+
In March, Disney+ said it would launch an advertising-supported subscription level that will not be free but will cost less than the existing $11.99/month single membership. It will arrive in Australia (and much of the rest of the world) in 2023, but it'll begin in the United States later this year.
It's a bold move in and of itself, but it's especially fascinating when you consider that Netflix, Disney+'s main competitor, is adamant about ignoring the trend.
What is the new model's purpose? According to Disney's CFO Christine McCarthy, the objective of the strategy is to satisfy consumer demand for high-quality streaming subscriptions at around $10 per month.
What are the benefits, and what are the drawbacks? There is a risk. It's known as cannibalisation - existing customers moving from a "premium" plan to an ad-supported one, which results in revenue loss. However, Disney will have factored this into their planning; they'll be going ahead assuming that ad slots sales will make up for any potential loss from users downgrade.
The benefits are twofold: reach and data. By providing a cheaper, ad-supported service, Disney+ will entice more people to subscribe which gives them greater market share. And with more subscribers comes more data that Disney can use to better target ads - a valuable commodity in the streaming wars landscape.
Will it succeed? Finding the optimum position will be critical, as it is with most subscription businesses. In this case, that sweet spot will be a happy medium between not too cheap that the calculation doesn't make sense and not too pricey that price differentiation can't help potential consumers choose it.
Avoiding a low-value price point will be simple. How to get the most out of advertisers is something that will need more caution and thought. Because Disney has always had excellent material – and has only improved with several purchases over the previous ten years – it's no surprise that there is demand from marketers. How they respond to that demand will be crucial to the model's viability.
Pivoting in the streaming wars is nothing new. What is interesting about this move is that Disney has been one of the few companies that have had great success with their streaming service so far. Most other participants have not been as fortunate.
It's important to remember that when a company goes over a specific revenue mark, it becomes more expensive for them to operate—and less profitable. But if we open the floodgates, I think it would be a bad idea. Instead, they should (I believe) put few advertisements throughout their programming. This approach guarantees maximum yield - advertisers are willing to pay a lot for little screen time, because it's so valuable.
The other side of the coin is that people HATE commercials (unless they are interactive of course!). It's one of the main reasons why people are willing to pay for ad-free content in the first place. So Disney will have to be very careful about how many ads they show, and where.
They can also increase the chances of sustainability by attracting new consumers, in addition to advertisers. And to do so, naturally, the firm must compete with dozens of others all aiming to attract TV and movie fans who have yet to sign up for their service. And, again, back to Netflix.
They haven’t equivocated in their response to the Disney+ news:
“We have no plans to introduce ads on Netflix. We believe that our members should control what and how they watch – across devices and with no interruptions for ads,” their PR director for Australia and New Zealand said recently.
This puts the two firms at odds over a fundamental aspect of their streaming package. Netflix feels that consumers don't want their viewing interrupted by advertisements, while Disney+ believes there is a sizeable portion of this consumer group that isn't opposed to ads and would accept them in exchange for a lower cost.
But before you can make an impact, you must first learn from the mistakes of those who have come before. The stakes are high, and so are the risks. One poor decision may turn a seemingly good change into one that is remembered as a blunder in history.
If Disney takes precautions and minimises cannibalism, there's a chance both methods - theirs and Netflix's - can coexist and even flourish side by side.