Disney+ is exploring a free tier for the streaming service, CEO Josh D’Amaro said during the company’s third quarter earning call on Wednesday morning.
D’Amaro told analysts that a free tier could allow the streamer to “accomplish several goals and hopefully do that efficiently.”
“First, we see it as a way to expand our reach to a customer segment that’s more price sensitive. Expanding our reach is, as we’ve talked about before, one of our strategic priorities. Second, unlike a lot of our AVOD [advertising-based video on demand] competitors, we’re fairly well sold, meaning more inventory would actually help us accelerate our ad revenue growth. And then finally, as you mentioned in your question, a free offering could help us drive top-of-funnel Disney+ subscriber growth,” D’Amaro said. “So nothing specific to announce today, but definitely something that we’re considering.”
The model D’Amaro is proposing sounds most similar to one that Peacock and Hulu used to offer. Until 2023, Peacock offered a free tier with ads to subscribers alongside its ad-free paid tiers. Hulu axed its free tier years earlier, cutting the option in 2016. There are also several free ad-supported streaming TV services in the market such as Tubi, Roku TV and Samsung TV Plus. Fox owns Tubi and is in the process of acquiring Roku. However, because these TV models are completely ad-supported, they operate in a different way than streamers like Disney+ and traditionally offer fewer high budget originals and exclusives.
Historically, the benefit of free tiers is to entice consumers into using a new streaming platform. That’s why Peacock was free for so long. As for Hulu, the streamer that started as a joint venture between News Corporation and NBCUniversal was created as a way for network TV to start capturing the emerging streaming market. Given this history, it’s a bit unusual for Disney+ — an established streamer that accounted for 4.9% of all TV viewership in May — to consider a free option. It’s a move that implies Disney is considering modeling its streaming vertical to be more like YouTube and FAST streamers, the only streamers that remain free.
