Yes, ads are coming to both Netflix and Disney+. Facing its first subscriber drop in more than a decade, Netflix teed up its plan for an ad-supported tier that could launch by the end of this year — sooner than originally implied on the company’s most recent earnings call.
Rival Disney+, however, not only beat Netflix to the ad announcement punch, but the company also revealed more details about its strategy during this year’s upfronts. Disney+ also has a leg up on its adtech infrastructure, since Disney-controlled Hulu already supports ads.
For both companies, not only will this bring in a new source of revenue via eager advertisers wanting to address the coveted streaming target, but it will also garner more subscriber revenue from a growing set of price-conscious consumers who are increasingly concerned about how much they’re paying in aggregate for various streaming platforms.
Ad-Supported Tiers Will Increase Netflix And Disney+ Users While Offsetting Churn
Forrester’s May 2022 Consumer Energy Index And Retail Pulse Survey of 1,556 online adults in the US, UK, and France finds that 8% of US online adults indicate that they don’t currently subscribe to Netflix but would subscribe if it offered a lower-priced option with ads. Twelve percent express the same about Disney+. Six percent of US online adults who subscribe to Netflix, however, indicate that they will downgrade their Netflix subscription to its ad-supported tier if it were offered at a lower price. Similarly, 5% indicated the same for Disney+.
With regard to user churn, our data shows that 7% and 6% of US online adults who currently subscribe to Netflix and Disney+, respectively, plan to cancel their subscription within the next three months. Note that overall data patterns were similar for online adults in the UK and France, although 17% of online adults in France who don’t currently subscribe to Disney+ indicate that they will subscribe if it were offered at a lower price with ads — representing the biggest growth opportunity of all three countries in our survey.
Disney+ Will Draw More Ad-Supported Users Versus Netflix — Driven By Gen Z
According to our data, greater percentages of online adults in the US, UK, and France plan to subscribe to Disney+ when it offers a lower price point with ads versus the same for Netflix. When segmented by generation, it’s Gen Z adults (specifically for Disney+) who signal the greatest intent to subscribe. For example, nearly one in five (18%) of US Gen Z adults indicate that they don’t currently subscribe to Disney+ but would subscribe if it were offered at a lower price with ads.
This, of course, makes sense, given that Gen Z adults are either in college or recent graduates with typically less disposable income versus their older-generation counterparts. We know from other Forrester data sources that this generation tends to tolerate ads the most if it means paying less or getting content for free.