This week Disney became the latest streamer to hike its prices, raising its ad-free plans for Disney+ and Hulu by 13% to $21.49/mo for the standalone versions and by 10% for its Hulu-Disney+ bundle to $21.99/mo. The ad-free bundle of Disney+, Hulu, and ESPN Select will also jump 10% to $32.99/mo as the top-tier Unlimited bundles hold steady at $44.99/mo and $35.99/mo. Streamers have clearly run the numbers and believe that widening the price gap between ads and no ads helps push more consumers to lower-cost ad tiers that boost eyeballs for advertisers and lead to higher CPMs. Giving cash-strapped consumers more affordable options also reduces sticker shock and, by extension, churn risk. According to our StreamTRAK ® video intelligence service, the combined ad-free basket of Discovery+, HBO Max, Hulu, Paramount+, and Peacock increased 52.8% since 2022 as the ad-supported basket increased 61%. But that higher rate is largely because the ad tiers started from lower prices so that a $1 or $2 increase represented a bigger leap percentagewise. So while the ad tier price growth rate at Paramount+ was twice that of the ad-free tier, it amounted to a meager $4/mo increase from $4.99/mo to $8.99/mo. However, the absolute price gap between ad-free and ad tiers widened for all the services except for Paramount+, with the average aggregate monthly gap for the five-service basket expanding by 41%. In fact, Disney+ Premium’s ad-free tier went from $7.99/mo in early 2022 to this week’s new price of $21.49/mo, up 169%, vs. Disney+ Basic, which launched in late 2022 at the same price ($7.99/mo) but has since only increased 56% to $12.49/mo. And strategies clearly vary: recall that Amazon Prime Video in early 2024 forcibly converted its customers to an ad tier unless they paid to opt out. And the running assumption is that most simply shrugged and watched the ads.
Next? Consumers generally don’t love watching ads, and all things being equal, most would choose an uninterrupted viewing experience, except for live sports where ad breaks are simply part of the ebb and flow of games. But as the above stats suggest, all things are not equal, with the widening gap between ad-free and ad-supported services making it easier than ever to bite the bullet and downgrade to an ad tier to save a few bucks per month. And as consumers look at what they’re spending across all services, those bucks add up across many services. Charter’s efforts to integrate the ad tiers of major streamers with linear TV for its best video subscribers (now extending to Cox markets) will only push more people to abandon those pricier ad-free tiers. The price gap will continue to widen over time, potentially making the ad-free experience a luxury item for wealthier households able to shrug off an extra $50-100/mo across multiple services just to avoid the ads. Of course, advertisers might have to get more creative in how they target those more affluent and ad-adverse households in the future, but that’s an analysis for another time. When it comes to pricing, expect the gaps to keep widening as the audience for advertising content via streaming continues to expand.
