Disney CFO Christine McCarthy stopped by a Morgan Stanley investor conference this week to provide some more details around the upcoming ad-supported tier launch for Disney+.
She referred to Disney+ as still a “toddler” in the streaming video business and suggested that her company has changed its thinking about the service over the past few years.
“We had some preconceived notions of what we thought consumers wanted. We’ve done a lot of research and have found that a lot consumers do not mind, and some are more favorably disposed to services with ads than without ads,” she said.
Disney has experienced an “incredible amount” of advertiser demand since the launch of Disney+ in November 2019, said McCarthy, who added that results around addressable advertising on Hulu demonstrates that the company has more demand than it does supply.
McCarthy confirmed the upcoming Disney+ ad-supported service, which is scheduled for launch later in 2022, will be the lowest cost tier but suggested that the launch isn’t all about price sensitivity.
“Some people just don’t mind seeing ads. So, we look at this as something that’s going to be a win-win for the consumers who want it, the consumers who couldn’t afford it otherwise, and it’s also going to be great for the advertisers because we have a very unique audience,” she said, adding that Disney will be very careful about what ads are accepted and how they’re placed. She said Disney+ will have a “lighter ad load” and the ads will comply with child protection policies, COPPA regulations and domestic and international privacy laws.
Disney has some ideas about what content lends itself best to ad breaks. McCarthy suggested movies on Disney+ will include ad breaks and that linear content is already written in a way that naturally builds in breaks.
Over the past few years, Disney has unified its ad sales group so it can handle demand across linear channels, digital and direct-to-consumer platforms.
“We look at this [ad-supported Disney+] as just being another component of an offering. There could be potential upside. We’ll certainly welcome it if it draws in more subscribers and if it increases ARPU. But we’re really doing it to address consumer choice,” McCarthy said.