Nearly 1 in 4 Disney+ subscribers in US Will trade down to cheaper, ad-supported tier when it launches this week, Kantar

When Disney launches the ad-supported tier of Disney+ later this week, about one-quarter of current U.S. subscribers are expected to opt for the lower-cost version with ads, according to new research from Kantar.

The firm, which conducted an online survey of streaming subscribers in the U.S. from September 5 to 24, found that about 23% of them would opt for the cheaper Disney+. About 46 million of the global tally of 164 million Disney+ subscribers are in the U.S. Starting Thursday, the price of Disney+ as a stand-alone will rise to $10.99 a month as the new ad-supported plan kicks in at $7.99. Prices of Disney+ as well as Hulu and ESPN+ will all continue to be discounted via the Disney Bundle.

Disney execs have said they think the new version of Disney+ will enable them to attract new subscribers who may be more sensitive to price as well as keeping existing customers in the fold. The decision to jump into streaming was made while Bob Chapek was CEO and his key lieutenant, Kareem Daniel, was overseeing streaming strategy. Both were ousted last month and former longtime CEO Bob Iger has returned to lead the company, with wringing more profit out of streaming high on his list of priorities. Netflix last month made a similar move, launching its own $7-a-month ad-backed version. Execs at Netflix have steadfastly maintained that they don’t expect a significant number of subscribers trading down to their cheaper tier. (Kantar research has surfaced a percentage for Netflix subscribers comparable to its figure for Disney.)

Kantar data for the third quarter, which ended September 30, found that Disney+ again over-indexed in “stacked” streaming viewers, meaning those who subscribe to multiple outlets. In the quarter, Kantar found that Disney’s “churn” rate, meaning the percentage of subscribers who canceled, decreased from 9% in the prior quarter to 6%. Had the cheaper, ad-supported plan existed, those 23% of subscribers who said they would trade down for it would have trimmed the overall churn rate even more.

The move into streaming advertising could open up Disney+ to new viewers and subscribers who may not have been drawn to it when it launched in November 2019. Over the past three years, Disney has opened the aperture in terms of programming, adding live events like Dancing with the Stars and non-franchise fare like Peter Jackson’s multi-part Beatles documentary Get Back. The Kantar survey found that Disney+ had an 8% share of total screen time among viewers who regularly watch ad-supported video on demand (AVOD) programming. Another potential benefit for Disney is that AVOD viewers skew a bit younger than the average streaming viewer and also are more likely to have young families.

Growth in the streaming realm is favoring offerings that combine ad-free and AVOD or even free, ad-supported (FAST) options. Of the recent crop of multi-billion-dollar challengers to Netflix, only Apple TV+ remains limited to an ad-free plan, and after three years in the marketplace the tech giant recently phased in a steep price hike. Deadline