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Disney+ will introduce a cheaper, ad-supported version this year

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In this photo illustration the Disney+ logo seen displayed on a smartphone screen. (Photo: Getty Images)
Disney+ will soon be available at a reduced price, but you’ll have to sit through commercials.

The Walt Disney Co. said Friday that it would introduce an ad-supported version of its Disney+ streaming service in the United States late this year, with plans to roll it out overseas in 2023. The move reflects the hot streaming ad market, the pressure on Disney to keep its streaming business growing and a broader trend among media companies to try to rebuild the traditional television ecosystem online.اضافة اعلان

But a lower-priced Disney+ carries risks, including potentially speeding the decline of some of Disney’s cable networks.

Disney has not yet set a price for subscriptions. The no-ads version, which was introduced in 2019, costs $8 a month. Although the streaming marketplace is changing rapidly, competing services charge 30% to 40% less for their ad-supported options. (For instance, Paramount+ charges $5 a month for “limited commercial interruptions” and $9 a month for no ads. HBO Max with ads runs $10 a month, and HBO Max without is $15 a month.)

The Information, a technology and media news site, on Thursday reported that Disney was discussing an ad-supported option.

“Since its launch, advertisers have been clamoring for the opportunity to be part of Disney+ and not just because there’s a growing demand for more streaming inventory,” Rita Ferro, president of advertising sales at Disney Media and Entertainment Distribution, said in a statement. Disney’s announcement comes as the company prepares for the television industry’s traditional “upfront” ad-selling season.

In offering an ad-supported version of Disney+, Disney joins rivals like WarnerMedia, Paramount Global and NBCUniversal, all of which offer tiered subscription pricing based on how many ads are fed to viewers. (The major exceptions are Apple TV+ and Netflix, which has repeatedly said that it has no plans to move into advertising.) Disney’s own Hulu carries ads.

But advertising is a unique risk for Disney+ because of the company’s dominance in children’s television. For decades, Disney Channel, the company’s flagship cable network, marketed itself to parents as a safe space. It does not carry any advertising, even in programming aimed at older children (unlike Nickelodeon).

Some areas of Disney+ are likely to remain ad-free, regardless of the subscription plan; the service, for instance, carries a great deal of content for pre-school-age children. But the line could be blurry. Ferro cited Pixar as one brand that advertisers would be able to access.

Some analysts questioned the timing of Disney’s announcement. “Is sub growth slowing?” Richard Greenfield, a founder of the LightShed Partners research firm, wrote on Twitter, referring to subscribers. “Lots of content coming, why cut price now.” Greenfield and others also wondered whether the move could be a precursor to combining Disney+ and Hulu. In early trading Friday, Disney shares were down about 4%, to $140.

Kareem Daniel, chairman of Disney Media and Entertainment Distribution, positioned a lower-priced, ad-supported Disney+ option as “a win for everyone — consumers, advertisers and our storytellers.” Disney said the offering was “a building block” in the company’s promise to Wall Street that Disney+ will have 230 million to 260 million paid subscribers by 2024. Disney+ added 11.8 million subscribers worldwide in its most recent quarter to reach 129.8 million.

Disney’s streaming division lost roughly $600 million in that quarter — about 27% more than a year earlier — because of costs that included content production, marketing and technology infrastructure. The company said last month that streaming programming expenses in the current quarter (for Disney+, Hulu and ESPN+) would increase by $800 million to $1 billion.

Disney has told investors that the division will be profitable by 2024. To accomplish that, the company has been aggressive in shaping its streaming portfolio in the image of its old-fashioned cable television business. That includes generating revenue from both subscriber fees and advertising sales and selling its services as a bundle. Last year, Disney began requiring some Hulu subscribers to also take Disney+ and ESPN+. This type of bundling is what made cable so profitable for media companies for decades.

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