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AD-SUPPORTED DISNEY+ WILL LEAN ON COMPANY'S SUCCESS WITH HULU

By Matthew KeysMay 18, 2022 10:34pm
DisneyDisney+Huluadvertising-based video on demand (AVOD)
Intel and experience from the Hulu team has helped Disney set the foundation for
its forthcoming ad-supported tier on Disney+. (Hulu)

An upcoming version of Disney+ that will be subsidized through advertising will
draw on the success of the company's other ad-supported service, Hulu, company
executives said on Wednesday.






Speaking at the MoffettNathanson Media and Communications Summit, Rita Ferro,
the company's president of advertising sales, said the integration of Hulu into
the Disney portfolio of brands and services created an environment where
executives at Disney learned just as much from their Hulu counterparts as the
other way around.



"Hulu was the first AVOD [advertising video on-demand] platform, so they have 14
years of experience in this space," Ferro said, adding that the Hulu team
brought "intel and learnings to our team [at Disney]."




That intel and experience has helped Disney set the foundation for its
forthcoming ad-supported tier on Disney+. Which is good, Ferro said, because
companies, marketers and ad buyers have shown interest in advertising against
Disney+ since it launched nearly three years ago.

"I can't even tell you the demand we've had for this," Ferro said. "I remember
the day Disney+ launched, I had four or five clients call me and say, when is
the date?"


RELATED

Disney+ adds 7.9M subscribers to reach 137.7M

Since then, Disney has taken a methodical approach toward building out its
ad-supported tier: Ferro said the company has been "preparing for this moment
for years" and has taken a careful consideration to the type of content where
advertisements will appear, how long each commercial spot will run and how often
commercials will interrupt a movie or TV show.



To that end, Ferro said Disney intends to launch with 15-second and 30-second
commercial spots, with no more than four minutes of interruptions per hour of
content. Commercials will run against content viewed by children, Ferro said,
but the service won't insert advertisements when pre-school aged users are
watching and won't collect data on young viewers.

Christine McCarthy, Disney's Chief Financial Officer, said the company will lean
heavily on the lessons learned at Hulu when it comes to Disney+'s advertisement
strategy, though some adjustments will be made.

McCarthy said there would not be as many ad "pods," or commercial breaks, as
there are on Hulu, where an hour-long show can have anywhere from 7 to 10
minutes of commercials (Hulu's ad pods are capped at 90 seconds each). For that
reason, available commercial inventory on Disney+ will likely command a premium
price.

"It's a different product and a different market," McCarthy said, referring to
Disney+. "We do expect there to be a premium from [Disney+] advertising that we
think will enhance the ARPU."

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Disney has not released the price of the new ad-supported tier for Disney+, so
it's unclear how much users will save by opting for content interrupted by
commercials. But Disney says its streaming customers seem tolerant of
advertising: Hulu, which charges $7 a month or $70 a year for its base,
ad-supported plan, has more subscribers than an ultra-premium, but costlier,
version of the service that eliminates commercials altogether.

"We actually have more AVOD than SVOD subscribers [at Hulu]," McCarthy said. "We
think that will probably, we expect about the same percentage for Disney+ and
Hulu just based on the experience curve that we've witnessed."

VideoAdvertisingsubscription video on demand (SVOD)

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