Disney+ paints a bleak future for ad-free TV

Six months after a big price hike for ad-free streaming, Disney+ subscriptions have stalled out. But as Disney tells it, that’s okay.

The company lost 300,000 streaming subscribers in the U.S. and Canada in Q1 2023, after gaining just 200,000 the quarter before that. The company’s growth hit a wall right after it raised ad-free prices from $8 to $11 per month, while introducing an ad-supported tier at the old price.

You might think Disney would rethink its price-hike strategy in response, but no: Disney+ is closer to turning a profit now than it was a year ago despite a stagnant subscriber base. CEO Bob Iger has even indicated that Disney+ will raise prices again on its ad-free tier later this year.

The sad truth is that viewers who watch ads are better for business than those who don’t. Commercial-free TV will become a luxury as a result.

The ad-free tax is increasing

Disney isn’t alone in seeing the light on ad-supported streaming.

Hulu (which is majority-owned by Disney) was the first to discover that it can make more money from ad-supported viewers than ad-free ones. In 2019, the New York Times reported that Hulu generates $15 per subscriber on its ad-supported tier, which at the time cost $6 per month. Its ad-free service cost $12 per month by comparison. The price gap has only widened since then, with Hulu now charging $8 per month with ads and $15 per month without.

Netflix has also been marveling at the profit potential of ad-supported streaming. In its most recent earnings call, the company noted that its $6.99-per-month plan with ads—introduced last fall—already brings in more money per subscriber than its Basic ad-free plan globally, and more than its Standard $15.49-per-month plan in the United States. The company has responded by improving the ad-supported plan, with support for two simultaneous 1080p streams instead of one 720p stream at a time.

HBO Max—soon to be just “Max“—has widened the gap between its ad-supported and ad-free plans as well, tacking a $1-per-month price hike onto the latter in January. It now costs $16 per month, versus $10 per month with ads. (Annual ad-free plans, at least, remain unchanged at $150 per year.)

Meanwhile, YouTube has raised the price of its ad-free Premium plan for families and is experimenting with an ad-blocker crackdown on its website. Apple also raised the price of Apple TV+ last year, and a recent ad-executive hire has led to speculation about further price hikes and a cheaper ad-free tier to come.

That brings us back to Disney+, which plans to raise prices on just its ad-free tier later this year. The company hasn’t revealed any specifics on pricing or timing, but in a recent earnings call, Iger observed that Disney’s previous hike has “proven successful,” and that the next one will “better reflect the value of our content offerings.” (Even so, Disney plans to remove some of that content from its catalog.)

What’s a cord-cutter to do?

Sadly, there’s no easy way to avoid this new luxury tax on ad-free streaming. Cord-cutters can look to streaming DVR workarounds such as PlayOn and Channels, but those come with their own costs and complications, and they’re certainly not for everyone.

In lieu of any magic solutions, viewers will need to be even more judicious about which ad-free services they pay for. As always, seasonal sales, comeback deals, and wireless carrier giveaways can help defray the costs even as commercial-free viewing goes up. Rotating through services and aggressively canceling those you don’t need will become even more important.

The popularity of ad-supported streaming is how we got here in the first place. Voting with your wallet is the only way out.

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