As Disney plans to take full control of Hulu for at least $8.61 billion, it's also celebrating the first anniversary of launching Disney+’s ad plan in the U.S.
The media giant has seen recent success attracting new customers to streaming. In the last quarter, Disney+ added nearly 7 million subscribers, with about 2 million signing up for a plan with ads. This brings the total number of subscribers on the ad tier to over 5 million in the U.S.
On top of that, Disney reported in October that half of new subscribers in the U.S. choose to accept ads. Indeed, analytics firm Antenna recently reported that around twice as many new users are signing up for an ad plan on Disney+ compared to Max and Netflix.
With the advertising plans now spreading to Europe and Canada, all of this signals Disney is just getting started as it scales its advertising operation and offers deeper ways to measure audiences. CEO Bob Iger has remained steadfast in banking on streaming to lead the Mouse House into the future, and shared during the last earnings call that he believes the company is still on the right path.
That path increasingly includes biddable media, or the ability to buy media in a real-time auction. The media giant recently expanded its addressable offerings to include private marketplace deals, with Iger saying on the latest earnings call that there is great demand from brands to get in programmatically.
“Advertising is undergoing a technology transformation. It’s why you’ve seen the development of ad tech platforms, a search for alternative solutions for [identity] currency, and expanded measurement. Automation has allowed us to increase the diversity of our advertising base, which ultimately creates a better user experience for customers and provides results for the industry,” Matt Barnes, Disney Advertising’s VP of programmatic sales, tells The Current.
After setting a goal to deliver 50 percent of its ad spend through automation by 2024, Disney’s President of Global Advertising, Rita Ferro, confirmed at this year’s upfronts presentation that the company is well on its way toward that goal.
For Goodway Group, Disney’s move toward automation aligned perfectly to its clients’ needs. The digital marketing firm’s Director of Strategic Partnerships, Andrea Kwiatek, shares that the agency jumped at the opportunity to advertise programmatically for its clients on Disney+.
A big moment came earlier this year when Disney offered more flexibility with its upfront deals for the first time, allowing Goodway Group to tailor its activation strategy to the needs of its clients instead of being tied down by predetermined ways of spending a la traditional methods.
“We’ll commit the budget, but let us activate how we want to activate,” Kwiatek tells The Current. “And that's where you've seen the flexibility be a win-win for both of us because we'll spend it but each way to activate depends on the client and the campaign.”
This comes as a major sea change confronts the upfront process all together, with advertisers and media buyers demanding more flexibility across the board.
Disney also dropped pricing incentives to do direct deals over biddable ones for the first time, according to Kwiatek, who calls it “a huge win in my book because it was like you were incentivizing inefficiency for doing direct versus efficiency doing biddable.” She adds that as things move more toward programmatic for Disney and other content owners, they’ll likely become even more flexible with their agreements.
Path to profitability
These moves all come as Disney pushes for profitability with its streaming division. Several media companies have stemmed billions in losses over the past few years, but Disney is making gains. Its combined streaming business with Disney+, ESPN+ and Hulu saw a year-over-year improvement of over $1 billion, finishing with an operating loss of $387 million in the fourth quarter, according to interim CFO Kevin Lansberry. Those smaller losses came from higher advertising revenue, pricing increases, and cutting spending on new content.
All the while, Iger has stayed consistent that he projects Disney’s streaming business will become profitable by the end of 2024.
“The building blocks are in place to turn this into a real growth business for us,” Iger said on the company’s last earnings call. “And the recent announcement about purchasing the remaining stake in Hulu is just one of those building blocks.”
Turning down churn
Part of keeping the flywheel of revenue going is making sure people don’t cancel their subscriptions. This is where Disney’s plan to buy out Comcast’s 33 percent share of Hulu for at least $8.61 billion comes into play. Disney is launching the full version of the super app with Hulu and Disney+ in 2024, which Strategus’ co-founder and senior VP of strategy and innovation, Joel Cox, believes will make it harder for consumers to cancel their plans. Limiting churning is even more important in an ad-supported ecosystem than a subscription-based one, according to Cox, since more ad revenue comes as the number of viewers increase.
Disney is already seeing signs of that happening. The media giant reported in October that users on ad-supported plans of Disney+ saw engagement rise 35 percent from March to September of 2023.
“We have opportunities... in terms of increasing engagement,” Iger shared on the last earnings call. “We found that where we bundle, we lower churn. And again, these are steps that are all taken to ultimately turn this into a great business.”