a la carte, but with ads

When will the bubble burst? streaming? The issue has been around for a long time, because the problem is obvious: there are no consumers to support so many platforms, nor is the business itself profitable, as the major companies in the sector have been demonstrating year after year… with the honorable exception. of Netflix, which after years of negative numbers, has finally been able to grow green.

The question comes from recent statements by Bob Iger, CEO of Disney, precisely due to the company’s strategy for Disney+, a very popular service which, however, is still not profitable: only in the fourth quarter In fiscal 2024, the Direct-to-Consumer (DTC) segment, which includes Disney+, Hulu and ESPN+, recorded an operating loss of $138 million, although the losses generated by each platform are not specified.

But it is not all bad news for Disney, since the company’s income has experienced a notable improvement compared to the same segment and period in 2023, in which they recorded $984 million in losses. How have they achieved it? Following an example from the house, later implemented by Netflix: advertising-supported plans. That’s what Bob Iger accidentally said in Disney’s latest financial results presentation.

In an unusual way for what we are used to in the industry, Iger gave specific data on the acceptance of plans with Disney+ ads: in the United States it is chosen by 37% of subscribers, while in the rest of the world the percentage is reduced to 30%. Non-negligible figures for a modality that the company introduced at the end of 2022. There is no information on Netflix and other platforms in the sector in this regard.

“I don’t know if I was supposed to reveal those AVOD numbers,” he later admitted to the CEO. As interesting as the data is the reflection that accompanied it, and that is that the continued Price increase in the subscription to the service has not occurred only to increase direct income, but to “push” consumers to the cheapest subscription. with advertising.

“It’s not just about raising prices,” Iger explained. «It’s about moving consumers to the advertiser-supported plan (…) The pricing that we implemented recently, which is in fact a price increase, was actually designed to move more people in the AVOD direction because we know that ARPU (average revenue per user) – and the interest of advertisers in streaming – have increased,” he said.

What Iger explained, however, is what all platforms are doing for some time now. That and the end of the account sharing option, another of the keys to Netflix’s recent success. Ergo, we can only expect more increases in the plans without ads that force the subscriber to move to the plan with ads, which in turn will increase the number of ads and, of course, their price, although it will do so more gradually.

Or in other words, we will return to the traditional television model, with the only incentive of being able to choose what to watch and when to watch it.