Streaming giants race to launch advertising-supported subscription tiers

It’s no longer a case of whether Netflix will roll out an advertising-­supported option, but rather when. What impact ads will have on the price subscribers will pay is uncertain, but one of Netflix’s competitors, Disney+, announced last month that prices would drop for its ad-supported option.

Disney+ announced it would expand its offering with an ad-supported subscription in addition to its ad-free option, beginning in the US late this year, with plans to expand internationally in 2023.

It has now put a date on it, announcing the ad tier will be launched early in December, costing $7.99 (R137) a month in the US.

In South Africa, the current monthly subscription costs R119.

Kareem Daniel, chairperson of Disney Media and Entertainment Distribution, said: “Expanding access to Disney+ to a broader audience at a lower price point is a win for everyone — consumers, advertisers and our story­tellers.”

The ad-supported offering is viewed as essential to Disney’s target of reaching 230 million to 260 million Disney+ subscribers by 2024.

Until recently, both Disney+ and Netflix had offered ad-free streaming, but advertising revenue will bolster their bottom lines.

Disney has already enjoyed success with its Hulu tier, which is more lucrative per subscriber due to revenue from advertisers.

Netflix seems to be keeping its cards close to its chest, though. Variety magazine has reported that Net­flix is aiming to roll out the new offering on 1 November — pipping Disney+ to the post.

According to numerous reports, Net­flix plans to release it in multiple countries, including the US, Britain, Canada, France and Germany. 

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Advertisers are expected to pay through the nose, as Netflix apparently plans to charge about $65 (R1,113) per 1,000 views, capped at $20-million a year per advertiser so that viewers don’t see the same ads too often.

Customers can expect to pay between $7 and $9 a month. The ad-supported tier, according to Variety, will have an ad load of four minutes an hour for TV shows. For movies, ads will run before they start.

When asked about Netflix’s plans for advertising in South Africa, a spokesperson said the local operation had yet to receive detailed information. 

“While a date has been mentioned, there is still plenty of speculation in the media as to what the final decision would be on where ads will be placed… as well as the cost, which many media around the world are speculating at around $7 to $9, which, of course, will be different in many countries where Netflix charges for monthly subscriptions in local currency.”

In South Africa, the top three players — Netflix, Prime Video and Showmax — had 84% of the streaming market during the first quarter of this year.

The JustWatch streaming guide says Prime Video is hot on Netflix’s heels, with only a 3% gap between the two giants. Showmax, the local platform, is almost six times bigger than the next in line, Mubi and Apple TV+. JustWatch has not yet provided data for Disney+, which only entered the market on 18 May this year.

Customers have complained about technical problems with the Disney+ service, including poor video and sound quality. It is served in South Africa and Asia by the Hotstar platform in India.

Disney+ has a 2.2 rating (out of 5) on Google Play, as voted by ‎12,930 users. On the App Store, it achieved just 2 out of 5, as voted by more than 1,200 users. Hellopeter customers are even less impressed, with only two two-star reviews, and 40 one-star reviews.

Asked about complaints of inferior service in South Africa, a Disney+ spokesperson told Daily Maverick that the company is “committed to delivering a best-in-class streaming experience for all subscribers to Disney+, and Hotstar is a fantastic platform to operate in low-bandwidth/mobile-first environments”.

She added: “Our approach to delivering the best user experience possible to subscribers is ongoing and iterative. This applies to all markets where we operate.” DM