Disney+’s ad-supported video-on-demand (AVOD) plan is off to a faster start than either Netflix or HBO Max among new subscribers.
In the first month of release, 20% of new sign-ups were to one of the Disney+ ad-supported plans, versus 9% for Netflix in its first month and 14% for HBO Max. By its third month, this February, the Disney+ with-ads tier (including subs sold as part of a bundle with ESPN+ and Hulu) reached 36% of new sign-ups, compared to 19% for Netflix and 21% for HBO Max.
However, Netflix’s ad-supported plan is different than the others, because it’s available only with its Basic plan. The Standard and Premium service tiers, which include additional features like concurrent streams and HD quality, currently don’t have ad-supported versions.
Since its introduction in November 2022, Basic with Ads’ share of total Netflix sign-ups has grown from 9% to 19%, while the no-ads Basic plan’s share of total sign-ups has dropped from 41% to 18%. As of January, the with-ads version accounted for fully 54% of all Basic tier sign-ups.
Analysis of Disney+’s AVOD tier launch is complicated by its coupling with a price increase. Existing subscribers had to accept a $3 price hike to stay ad-free, or accept ads and maintain the current price, or cancel.
Among Premium plan subscribers, Antenna found that a whopping 94% took the price increase to stay ad-free, 5% canceled, and under 1% maintained their current cost by switching to the ad-supported plan.
Looking across the ad-free plans now available among premium streaming services, consumers are “clearly demonstrating that they are willing to choose advertising in exchange for a lower price,” Antenna notes. The trend is particularly pronounced at Peacock, where three out of four subscribers now have the ad-supported plan.
Still, growth takes time.
HBO Max’s ad-supported plan saw incremental increases among both new signups and existing subscribers in the months following its launch in June 2021, to reach 20% of new sign-ups by its third month, August 2021.
As of February 2023, HBO Max's ad-supported subscriptions account for 20% of total subscribers. However, that's modest next to the 75% penetration of Peacock's ad-free tier, which was launched only about a year earlier, and the 43% ad-supported shares at both Discovery+ and Paramount+, which each launched with both ad-supported and ad-free plans in first-half 2021. (Hulu launched as a free, ad-supported platform in 2008 before establishing a subscription tier in 2015.)
While Antenna doesn't suggest this, it seems possible that HBO Max, which has a subscriber base accustomed to ad-free content for decades, may have a relatively low natural saturation rate for a with-ads option.The Disney+ and Netflix AVODs are seeing incremental ad-free sign-up increases similar to HBO Max's in their first months, with Disney+ growing a bit faster than HBO Max, and Netflix a bit slower. This, says Antenna, suggests that both services are “headed toward accumulating meaningful audiences for advertising.”