Ads On Netflix And Disney+ Will Pay Off
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.
This post was written by VP, Research Director Mike Proulx and it originally appeared here.